How do I load OSX on an external hard drive (on my macbook) and boot from it?

I am having internal hard disk problems that disk utilities can't fix. I need to keep working and would like to use an external hard drive as the system disk, either clone the existing internal one, or preferably load a complete 'new' OSX on the external drive. Then maybe swap them over. Is there an easy way to load a new version of OSX on an external drive?