Human Capital Approach

The human capital approach to economic evaluation places a monetary value on loss of health as the lost value of economic productivity due to ill health, disability, or premature mortality. More specifically, the human capital approach uses the present value of expected future earnings, often adjusted for nonmarket productivity, to estimate the potential loss to society if an individual dies or becomes permanently disabled. It is commonly employed in cost-of-illness (COI) analyses that distinguish between direct costs, chiefly medical care, and the indirect costs of lost productivity. It is also employed in certain cost-effectiveness and cost-benefit analyses, particularly in older publications.

The idea that a human life can be valued by capitalizing the value of future earnings goes back to Sir William Petty in England in ...