ABSTRACT
This chapter introduces the conceptual framework of individual decisions about health and health care. Using the labor–leisure model in economics, it introduces illness as a tax on time, preventing hours from being allocated to productive or leisurely activities. In this context, health allows the individual to have more leisure or income-generating hours. The chapter next describes the Grossman model, which posits health as capital, akin to a durable good, depreciating with age. It also discusses the stock of health, motivating investment through health-generating behaviors or medical interventions. The Grossman model allows health to bring an intrinsic utility to the individual, as well as allowing for greater enjoyment of consumption of all other goods.
The chapter then considers empirical analyses of the Grossman model, comparing aggregate outcomes such as expenditure on health and mortality rate. The chapter concludes by considering obesity as a health behavior which appears to contradict the predictions of the Grossman model. The discussion presents obesity rates in the United States and around the world and estimates of the economic costs of obesity on individual health and medical care.
