(Bloomberg View) — Adult life is one long, sad tale of declining analytic capability and ability to remember things. I could tell you all about my personal experience with this, except that of course I've forgotten most of it.
There is an accompanying long, happy tale, though, of increasing wisdom and skill. When you put the two together, you get this forecast, from a slidedeck by Harvard economics professor David Laibson. The estimate is that cognitive function peaks at age 53.
That comes from a 2009 paper by Laibson, Sumit Agarwal, John C. Driscoll and Xavier Gabaix titled "The Age of Reason: Financial Decisions over the Life Cycle and Implications for Regulation." The four economists examined the fees and interest rates paid by thousands of borrowers in 10 different types of credit transactions, and found that, on average, such costs were minimized at age 53.3.
I've known about this paper for a while, read and reread it as I've gotten closer to 53, and referred to it in columns. But this week I saw Laibson present the findings at a conference, and two things stood out. One is that cognitive function really starts to go downhill for people in their 70s. The other is that the eldest of the baby boomers will start turning 70 in January.
Laibson presented another chart based on longitudinal data from the University of Michigan's Health and Retirement Study.
He found that the percentage of wrong answers accelerates in subjects' late 60s, and again around age 80. Other measures show different inflection points, but the general message is that cognitive decline is relatively slow in people's 50s and 60s, then really gets going around age 70.
These are just averages, of course, and I'd like to state right here that every over-70 person I happen to be related to or work with is way out there on the high-cognitive-function edge of the dispersion. But as the members of the giant baby-boom generation move into their 70s, and their elders live longer and longer, it seems inevitable that the ranks of Americans who struggle to remember that 10 percent of 1,000 is 100 are going to grow in the coming years.
To put it another way, data cited in the Agarwal, Driscoll, Gabaix and Laibson paper indicate that "about half the population aged 80–89 have a diagnosis of either dementia or cognitive impairment without dementia." That population is already growing, and the numbers will really explode when the baby boomers start hitting 80 a decade from now.
