Functional status in schizophrenia depends in part on cognitive function. Newer antipsychotics, such as risperidone, produce better cognitive function in patients with schizophrenia than do conventional neuroleptics, which implies that the indirect costs of the illness will be less in patients treated with risperidone. A robust decision-analytic model of schizophrenia suggests that the overall cost of treating a patient with risperidone is $11,772.00 per year compared with $13,622.00 per year for haloperidol and that the cost per response is even more favorable toward risperidone--$14,599.00 versus $23,040.00. This model supports the results of naturalistic trials in which risperidone produced better outcomes than did conventional neuroleptics. Overall, the use of the more effective, better tolerated newer antipsychotics should reduce the cost to society of schizophrenia and improve patients' quality of life.