Measuring the output of services industries has long been considered hard. “The
conceptual problem arises because in many service sectors it is not exactly clear what is being
transacted, what is the output, and what services correspond to the payments made to their
providers” (Griliches, 1992, page 7). Among the hard-to-measure services, no task has been
perceived as more difficult than measuring the output of the health care sector.
Why is measuring health care output so hard? The medical economics literature contains a
long list of intimidating and discouraging difficulties. In this paper, I propose to cut through this
mostly defeatist list by posing what at first might seem a narrowly-focussed question: Why is
health care different from any other analogous service, such as car repair?