else equal, one would expect a younger population to be classified as more healthy than an older one by most measures. The issue of how to separate pure age effects from changes in the disease environment and other shocks requires further study. Ideally, an account would coordinate data useful to researchers who want to estimate the effect of changing demographics on health levels. As the health account is developed, perhaps a demographics module (such as that discussed in Chapter 2) can be integrated. Not only is the demographic information necessary for estimating a population’s health stock, it also would be needed for estimating per capita effects (analogous to per capita GDP).


Defining the Output

Two outputs are associated with investments in health. The first is the flow of better health that results from the investment. The present discounted value of this flow is termed health capital. People enjoy being healthier just as they enjoy consuming better food or nicer clothing.5 The second output of investments in health is the additional income that a healthier population generates. A complete set of health accounts would include the present value of expected future earnings, perhaps augmented to include the value of expected future home production, that results from changed health. This is analogous to the way human capital is valued in the labor economics literature.

Recommendation 6.7: In the health satellite account, output should be measured independently of inputs (and the two need not be equal). Changes in both components of output—the consumption flow of good health and the additional (or reduced) income that a healthier (or less healthy) population earns—should be measured.

Health events, such as the contraction of a disease, affect the future consumption flow of health. These events, as well as interventions in response to those events, impact individuals’ quality of life across future periods, often in unpredictable ways. Money spent on a bypass surgery operation often will improve quality of life, and possibly reduce future mortality rates. Likewise, present levels of health are linked to past actions—the production of health is an intertemporal process tied to past levels of health care, diet, environmental and other factors (Triplett, 2002, p. 2).

The second output, that relating to the additional income that a healthier population earns, is most starkly observed in poorer countries, where many people have substantially impaired productivity because of poor levels of health (Strauss


Michael Grossman (1972) cites Jeremy Bentham as including health in one of 15 “simple pleasures.”

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