ABSTRACT
Background The introduction of the demand-for-health model some 30 years ago (Grossman, 1972a,b) was a major contribution to economics, and it remains a central theoretical model for the economic analysis of individual health behaviour. It was built on traditional neoclassical capital theory, the human capital theory developed for educational investments by Becker (1964), the theory of the allocation of time (Becker, 1965), and Lancaster’s new approach to consumer theory, which draws a sharp distinction between fundamental objects of choice – ‘commodities’ – and market goods (Lancaster, 1966). In his seminal paper, Grossman (1972a) emphasized (a) that health is a durable capital stock; (b) that health capital differs from other forms of human capital in that its main impact is on the total amount of time a person can spend producing money earnings and commodities rather than on his or her wage rate; and (c) that the demand for health care must be derived from the more fundamental demand for good health.
