The Economics of Mental Health

How mental health conditions affect individuals and economies, why the treatment gap is so large, and why investing in care can pay for itself.

Mental health is central to wellbeing, and it also has large economic consequences. Conditions such as depression and anxiety affect how people feel, but also whether they can study, work, care for others and take part in community life. The economics of mental health studies these costs, the reasons many people go without care, and the value of investing in treatment and prevention.

The size of the challenge

The World Health Organization has estimated that around one in eight people worldwide were living with a mental disorder in 2019, with anxiety and depression the most common. Mental health conditions often begin early in life; many start before the age of 25.

The economic costs are large. The World Health Organization estimates that depression and anxiety alone cost the global economy roughly 1 trillion US dollars each year in lost productivity. Some of this comes from people being unable to work, and some comes from presenteeism - being at work but unable to function at full capacity because of illness. Families also bear costs, as relatives reduce their own working hours to provide care.

The treatment gap

Despite effective treatments, most people with mental health conditions do not receive care. The difference between the number of people who need treatment and the number who receive it is called the treatment gap. In many low- and middle-income countries, the large majority of people with conditions such as depression receive no treatment at all. India’s National Mental Health Survey, carried out in 2015 and 2016, found a treatment gap of well over 70 percent for many common conditions.

The reasons are partly economic: there are too few trained professionals, services are concentrated in cities, and people may not be able to afford care or the time away from work to get it. Stigma also stops many people from seeking help.

Why investment can pay for itself

Economists often evaluate health spending by its return on investment - the benefits it produces compared with its cost. A major 2016 study led by researchers working with the World Health Organization estimated that scaling up treatment for depression and anxiety could return around 4 dollars in better health and productivity for every 1 dollar spent.

Reading a four-to-one return

Suppose a region spends 10 million dollars expanding access to talking therapy and medication for depression. A four-to-one return suggests that, over time, the region gains around 40 million dollars in value through people returning to work, working more effectively, and living healthier lives. Even if the real return were only half that, the programme would still produce more value than it cost.

In the United Kingdom, the economist Richard Layard helped make this argument, which contributed to the creation in 2008 of a national programme expanding access to psychological therapies in England, now known as NHS Talking Therapies.

Reaching more people for less

One promising approach in lower-income settings is task sharing: training community health workers and lay counsellors to deliver simple, proven psychological treatments under supervision. Programmes in India, Pakistan and several African countries have shown that trained lay counsellors can deliver effective help at much lower cost than specialists alone. India also launched a national tele-mental health helpline, Tele MANAS, in 2022 to widen access by phone.

Viewing mental health care only as a cost

It is easy to see mental health spending as a drain on budgets. The evidence suggests it is often an investment: treatment helps people return to school and work, reduces other health costs, and improves lives. Leaving conditions untreated usually costs societies more.

Key takeaways

Mental health conditions are common and carry large economic costs, including lost productivity and presenteeism.
The treatment gap is very large, especially in low- and middle-income countries.
Estimates suggest treating depression and anxiety can return several dollars for every dollar spent.
Task sharing and telehealth can extend care to more people at lower cost.