Lecture+08+Slides - The Health Production Function EEP 145...

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The Health Production Function EEP 145 Professor Michael Anderson U.C. Berkeley Dept. of Agricultural and Resource Economics
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The VSL indicates how we’re willing to trade off money and risk reductions, but not the best way to achieve those risk reductions Introduction VSL tells us nothing about the optimal way to produce risk reductions or health improvements Simply tells you that if some thing (technology/program/ whatever) can save a life for less than the VSL, then you should invest in it “Health production function” describes the different ways in which society can produce better health Similar to a standard production function, just more complicated
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Like any production function, the health production function maps inputs to outputs Health Production Function Textbook production function takes two inputs – capital and labor – to produce some level of output In real world, there are many different types of labor (different workers with different skills) and many different types of capital Real production function has multitude of inputs Similarly, there are many different inputs that can produce better health and safety Which inputs are more cost effective and which are less cost effective?
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The health production function should be of interest even if you don’t accept the VSL literature Health Production Function Suppose that you reject the VSL literature – you don’t believe that we should assign any price to lives, statistical or otherwise Even then, you should still care about costs Society has Fnite resources Upper limit to the amount of health and safety we can purchase Given that resources are scarce, we should deploy them so that we purchase the maximum amount of health and safety possible
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Lecture+08+Slides - The Health Production Function EEP 145...

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