ABSTRACT
This chapter conceptualizes the process of improving individual health. Production of health, as the chapter describes it, is akin to production of goods and services, incorporating features of traditional production functions. In particular, the chapter discusses diminishing marginal product of health, where, as health care inputs increase, their incremental contributions toward the health status decrease. Next, the chapter examines whether this model of production of health reasonably represents the real world by examining the timing of major medical and public health breakthroughs and incidence of death and disease.The chapter then addresses what happens when delivery of health care becomes more complex – how does one measure health and health expenditure. It provides some evidence of elasticity between health expenditure and health outcomes. The discussion then focuses on the contribution of health insurance toward production of health. The chapter finishes by examining the contribution of socioeconomic factors toward health, including behavioral choices, family and social capital, environment, and income and schooling.
