Discusses the problem of determining the appropriate allocation of resources within health; such is the usual problem of health planning. The paper points out why the market may not lead to a theoretical optimum; that is, why health planning may be necessary. Health planning, as it is often conceived, attempts to determine the best allocation of medical resources, where best is defined as that allocation which is most efficacious for health. This approach makes two errors: first, the effect of nonmedical inputs on health is ignored; second, the effect of medical inputs on things the consumer desires other than health status is ignored. 12 pp. Ref.