Grossman’s (1972) “production function” approach to the analysis of health and its determinants (incorporated into equation 2.2, above) has become the standard for economists’ thinking about the subject (see Bolin, Jacobson, and Lindgren, 2001). Yet attempts to implement the model empirically are few. The difficulties include the fact that health is multidimensional and—more problematic—that identifying and measuring its determinants are complex tasks.
Rosen and Cutler, in an ongoing project, are estimating disease models and combining them with economic data (see Chapter 3; Rosen and Cutler, 2007). Their research is couched within a Grossman-type framework and the related epidemiological perspective, so one can think of it as estimating equation 2.2 on a disease-by-disease basis. They have selected disease categories that account for a large portion of national health care expenditures and are working toward determining the factors—including medical care—that affect changes in mortality and morbidity. A second effort along similar lines for cancer and circulatory diseases in England is reported in Martin, Rice, and Smith (2008).
Beyond the Market: Designing Nonmarket Accounts for the United States (National Research Council, 2005) suggests constructing a health account that would provide a welfare-oriented measure as a counterpart to the market-oriented measures of the NIPA. Thus, it would be structured by analogy to the familiar national accounts that record economic activity but would be built around the functional relation and the variables in equation 2.2. Beyond the Market begins by identifying “gaps” in the existing national accounts that arise because their measures of outputs (and inputs) are incomplete—only market inputs and outputs are included. If the goal is to fill gaps in the NIPA coverage and structure, then it seems reasonable to work out an expanded accounting system that is patterned after the traditional national accounts structure.
However, assembling the data for an economic welfare account for health goes beyond the requirements for a database for research on health determinants. For example, Beyond the Market lists diet among health determinants, certainly an important consideration. The report of the World Cancer Research Fund/American Institute for Cancer Research (2007) summarizes evidence connecting dietary factors to different types of cancer—consumption of red and processed meats raises the risk of colorectal cancers, and excessive consumption of salt for stomach cancer, while consumption of fresh fruits and vegetables reduces risks of a number of digestive system cancers. A research model for cancers might be designed in which dietary data are employed in conjunction with medical care data to determine the relative impacts of diet and medical care on cancer death and incidence rates. If the objective is to estimate dietary determinants of health, then information on consumption of the foods of interest (data that are readily available) is the main requirement.
In the Grossman (1972) model, and from a welfare perspective, it is necessary