The Relation of ‘Human Capital’ Preservation to Health Costs*

John S. Spratt

American Journal of Economics and Sociology, 1975, vol. 34, issue 3, 295-306

Abstract: Abstract. The concept of 'human capital' has evolved in economics as a way of measuring the value society places on an individual. This value, it is argued, constitutes a real but seldom discussed limit on how much money either an individual or society will pay for the health costs of an individual. Conversely, it can be argued that the capacity of the health system to preserve ‘human capital', as created by nature and nurture and by ‘investments’ in education and training, is an economic justification for health costs, just as military costs are justified for the defense of the population. In the latter instance, the greatest public health benefit for the dollar would be obtained by Pareto optimal expenditures. Similarly a microeconomic model for the clinical process involved in diagnosing, treating and rehabilitating the diseased individual is suggested that relates the time consumed by the elements of the clinical process to the probabilities of maximizing the preservation of the greatest number of functional man‐days obtainable for an aging individual's cohort. For the model to work there would have to be an economic incentive for the health provider to engage in objective‐oriented, interdisciplinary, cost‐effective actions in the clinical process that would minimize the diseased individual's downtime and maximize his functional longevity in an operations research framework.

Date: 1975
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