Health economics took off in 1970 or thereabouts, just after the take-off date for the economics

of education. Although early health economics made use of human capital theory as did the

economics of education, it soon took a different route inspired by Arrow’s work on medical

insurance. The economics of education failed to live up to its promising start in the 1960s and

gradually ran out of steam. The economies of health, however, has made steady theoretical and

empirical progress since 1970 principally in coming to grips with the implications of supplierinduced

demand and the difficulties of evaluating health care outcomes. Some of the best work

on British health economics has been in the area of normative welfare economies, defining

more precisely what is meant by equity in the delivery of health care and measuring the degree

of success in achieving equity. Recent efforts to reform the NHS by the introduction of “quasi

markets” have improved the quality and quantity of health care in Britain. In short, British

health economics has been characterized by the use of Pigovian piecemeal rather than Paretian

global welfare economics, retaining a distinctive style that sets it apart from American health

economies. ©1998 John Wiley & Sons, Ltd.