2. Health outcomes: a production model.
The production of any good or service can be thought of as a process in which
inputs of various types are combined to produce a quantity of outputs.
Typically, inputs are physical resources (raw materials and capital equipment)
and labour; and output is either a physical commodity or a service.
There is no single relationship between the inputs and the output. The mix of
inputs can be varied; for example, machinery may be substituted for labour or
skilled labour substituted for unskilled labour. Thus, steel and labour are
inputs to the manufacture of cars but, aluminium or even plastic can be
substituted for steel. The car bodies may be painted by hand or by machine. Or
the amount of input can be varied. Thus, production can be increased by
increasing the number of people employed or the number of machines in
operation. When a given level of input is used to produce a higher level of
output, there is an increase in efficiency.
This simple model is illustrated in figure 1. The relationship between inputs
and outputs is described as a production function.
This model can also show how the output of one production process can be the
input into another production function. Thus iron ore and fuel are inputs to the
production of steel; and steel in turn is an input to the production of cars. In
this case, steel is more correctly regarded as an intermediate output.
Finally, output ends up in the hands of consumers. They use the output not to
pass on through another production process but for their own enjoyment and
wellbeing; what in economics terminology is labelled ’welfare’.
This simple model can be applied to health (Evans and Stoddart 1990). First,
consider the resources used in health care. These include the work time of
doctors, nurses, and other health care workers, the equipment they use, and