By Bad Seed
This the fourteenth 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.
Professor Becker continues to discuss the health investment problem and the Statistical Value of Life. Then, he develops a three period expected utility maximizing problem of investment in health which explicitly makes a difference between the conditional and the unconditional probabilities of surviving.
Then, he explains how the investment in health in one period impacts the unconditional probability to survive in further periods, even when investment in health only determines the conditional probability of surviving to the second period. As a consequence, he explains, it is more efficient to invest in good health during young ages; also, he explains the economic and demographic importance of health investments.
Also, he explains the time consistency issues in this kind of problem and why the agent's utility maximizing problem takes the unconditional probability of surviving as opposed to the conditional one.
Key concepts: conditional probability of surviving, diminishing returns on health spending, health investment, investment in health during young ages, statistical value of life, unconditional probability of surviving.
• Lecture 14, (45:10-47:10): Professor Becker explains how the investment in health in one period impacts the unconditional probability to survive in further periods, even when investment in health only determines the conditional probability of surviving to the second period.
• Lecture 14, (45:10-47:10): Professor Becker explains why it is more valuable to invest in health during younger ages.
• Lecture 14, (52:40-57:15): Professor Becker shows the benefits of investing in health in a generalized model with n periods of life.
• Lecture 14, (48:10-51:05): Professor Becker gives his opinion about what the health priorities should be in African countries where AIDS is a major issue.
• "Other things the same it is rational to go first (invest in health as human capital) for the early ages".
• "By raising your conditional probability of surviving to early ages you are also raising your unconditional probability of surviving to later ages".
• Salvador Navarro Lozano. Notes on Gary Becker's Human Capital and the Economy. pp. 21-25