Some years ago the parent of an ADHD child we had trained told us, “I would have given my house for what you have done for my child.” Nowadays such sentiments are more likely to be expressed by parents of autistic children. Not every person who pays for our services feels this way, but clearly a lot of people recognize that the value of neurofeedback bears no relationship to its costs. There’s no way to put a dollar value on the recovery of function in traumatic brain injury, dementia, or psychological trauma, or in the case of developmental delay.

This presents no problem to the economist who sees the price of an item as giving us the best measure of what it is actually worth. But we do have a problem in the economic modeling of health care precisely because perceived value is so out of line with costs. This is true across the board, and most particularly when it comes to life-saving medical interventions, or procedures that extend our useful lives further into the future. There’s almost no limit to what most individuals would wish to have done in order to recover function, and to extend useful life expectancy. What would Howard Hughes, for example, have been willing to do for his obsessive-compulsive condition? (If only he had had neurofeedback!)

Can one put this in terms that an economist can work with? The mother at the beginning of this tale saw the value to her child as equal to the value of her house, which probably constitutes the bulk of her assets. All of our tangible assets taken together probably amount to some five to ten times our annual GNP, give or take a housing and stock market bubble. So even if most people would be willing to pony up only some ten percent of their assets to assure the desired outcome of a critical medical or rehabilitative procedure, the total value still comes to something comparable to our whole GNP. One could go on to construct a wholly different GNP based not on actual prices but rather on perceived value of what the economy actually produces. Let’s call this a virtual GNP, on the basis of which one could envision a virtual economy of the future in which such value judgments would have a greater policy impact. We can see how that might go in the case of health care:

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Several disjoint pieces of information have been intruding on my consciousness for some while. At last year’s NBA finals, a courtside seat at Staples Center went for more than $27,000. That was for a single game. At about the same time, I noticed an ad informing readers that the 99cent store also had a bridal registry. These nuggets nicely encapsulate the two economic realms that coexist in our nation, particularly in our cities. The pattern is replicated abroad. In the world at large, there are enough cell phones for two-thirds of the world’s population, while the remaining one-third lives on less than $2 per day. When it comes to meeting basic survival needs, the amounts required are modest indeed, even in our society.

There are several implications. First of all, the economy we have is largely discretionary. Secondly, if the people at the bottom lose their livelihood, this can get lost in the economic aggregates. We cannot look to the aggregate economic pulse as an index to suffering. We have to look for it directly. The signposts are everywhere. A car’s windshield is smashed to yield an old iPod that is worth perhaps $30 on the street. A man slashes all the tires in a parking lot–no doubt the signature of seething resentments. A father kills himself and his family because of a $6,000 debt that he cannot cover.

The Fed is projecting on the order of 1.2% decline in economic aggregates for the year. Of course Fed projections are really lagging indicators. It does not want to be harbinger of bad news. But even if things turn out to be even three to six times worse, somehow that does not seem sufficient to put our society into crisis. The real crisis in fact lies elsewhere. At the bottom end, we have people falling out of the cash economy into penury. At the top end, we have the collapse of asset valuations. And in the middle we have a lot of stress and angst.

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