Essay Current Implications Of Public Policy

836 Words Dec 4th, 2015 4 Pages
The Grossman model provides the assumption that “health is a choice” (Bhattacharya et al, 2013:p47). This indicates that health is not necessarily something that is predetermined by our genetics or has intergenerational aspects. It suggests instead that individuals determine their own value of health from the trade-offs and opportunity costs they face, when making decisions related to their health. This in effect can lead to health being below Hmax and cause deviation from H*. This essay will evaluate these trade-offs in greater detail to establish why this occurs. Furthermore, the essay will also look at the significant implications of this model on public policy. In which it primarily raises the question about how do policy makers “encourage a switch … to health-enhancing consumption patterns” (Wagstaff, 1986:p1) so that individuals choose Hmax. Therefore, as policy makers how do we achieve maximised health in the population if health is thing individuals have the discretion to choose.

1.0 Deriving Optimal Health H*

The Grossman model determines individual’s optimal demand for health which we refer to as H*. This essay will analyse the multi-period model specifically as it is the most realistic in representing individuals and their lives. The multi–period model derives the level of H* by combining five components: the intertemporal utility function, time and budget constraint, production function and marginal efficiency of capital curve. Furthermore, the model has three…

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