Health as human capital: synthesis and extensions 1

The first major collection of articles on human capital (Schultz, 1962) contained discussions of education, on the job training, migration, and health. While literally thousands of articles and books followed on human capital dimensions of education and training, there have been many fewer discussions of health as human capital. This is partly because the contribution on health in this volume is not particularly insightful, but it is also because the concept of health as human capital relies on somewhat different concepts than does education or training. A major step forward occurred with Grossman’s work (Grossman, 1972) that modeled optimal investment in increasing longevity. This article stimulated a large literature, but nevertheless, articles on health as human capital have been only a small fraction of those on education and training. In fact, most of the economics literature on health discusses ways to improve the delivery of health care services, such as HMO’s or health savings accounts. Health care delivery is an important topic that interacts with considerations of health as human capital, but it is mainly a different topic. The emerging field of health as human capital builds on three interrelated developments to create a dynamic and evolving field. These developments are (i) The analysis of optimal investments in health by individuals, drug companies, and to a lesser extent by governments that follows on Grossman’s analysis, and also on the discussions in the insurance literature of self protection (see Ehrlich and Becker, 1972; and Ehrlich, 2000), and the literature on investments by pharmaceuticals. (ii) The value of life literature that analyzes how much people are willing to pay for improvements in their probabilities of surviving different ages (see, especially, Usher 1973; Rosen, 1988; and Murphy and Topel, 2006). (iii) The importance of complementarities in linking health to education and other types of human capital investments, and in linking investments in health to discount rates, to progress