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13of19 - The New Economics of Mortality - Investments in health

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Uploaded on Feb 10, 2011

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GARY BECKER

This the thirteenth lecture in the "Lectures on Human Capital" series by Gary Becker. This series of lectures recorded during the Spring of 2010 are from ECON 343 - Human Capital, a class taught every year by Gary Becker at the University of Chicago. In this class, Becker expounds upon the theory of Human Capital that he helped create and for which he won the Nobel Prize. Please see attached lecture notes, video annotations, and reading list for more information.

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Professor Becker goes over the model that he briefly introduces during the end of Lecture 12. This is a model of investment in health as human capital, per se. He models this investment process using expected utility maximization in a two period context. The choice variables in the framework he develops are consumption goods, leisure, and health.

Again, he explains the technical and economic reasons and consequences of the utility levels appearing in the first order condition in this case of value of life problem. He explains which are the costs and the benefits the agent faces in this context. Also, Professor Becker explains why people so infrequently buy annuities.

Finally, Professor Becker explains the concept of Statistical Value of Life and gives some examples of how to calculate it for the U.S. and other countries.
Key concepts: consumption goods, convex cost function of health investment, leisure, statistical value of life, utility levels.

Main discussions:
• Lecture 13, (07:15-12:50): Professor Becker explains which are the costs and the benefits that the agent faces in this context.
• Lecture 13, (45:25-50:45, and 01:18:55-01:22:10): Professor Becker calculates the statistical value of life for an average U.S. citizen. Then, he explains why the statistical value of life is lower for people in developing countries (particularly India).

Main quotes:
• "There's a lot of wealth that older people have that is not annuitized... why is that? Well, one explanation is that these people are leaving bequests and that is cheaper to have your children take care of you than to buy [actuarially] unfair insurance."

References:
• Salvador Navarro Lozano. Notes on Gary Becker's Human Capital and the Economy. pp. 21-25.

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Lecture Notes:
https://mindonline.uchicago.edu/media...

Reading List:
https://mindonline.uchicago.edu/media...

Video Annotations:
https://mindonline.uchicago.edu/media...

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