S/E/31. A Critique of the Grossman Model of the Demand for Health

This dissertation provides a critique of the Grossman Model of the demand for health. It analyses how the model was derived and develops it fully. How the model holds up to the plethora of empirical tests it has been subjected to in the thirty years plus since its publication is also examined. A critical assessment of the model's underlying assumptions and predictions is given thereafter. The writer carried out a piece of investigative work in seeking to determine contemporary thinking towards the model. This was achieved through correspondence with some of the most distinguished figures in the health economics field. The discussion then proceeds to highlight perhaps a neglected yet fundamentally important concept of the Grossman Model; that is, the notion of uncertainty. Grossman's model cannot accommodate (Keynesian/Knightian) uncertainty. Grossman's model is grounded in formalist mathematical rigour, which presupposes certainty.