A medical treatment is said to have placebo effects if patients who are optimistic about the treatment respond better to the treatment. This paper proposes a simple test for placebo effects. Instead of comparing the treatment and control arms of a single trial, one should compare the treatment...

Economists think of medical innovation as a valuable but risky good, producing health benefits but increasing financial risk. This perspective overlooks how innovation can lower physical risks borne by healthy patients facing the prospect of future disease. We present an alternative framework...

We develop a model where products liability trials provide information to consumers who are not parties to the litigation. Consumers use this information to take precautions against dangerous products. A critical assumption is that consumers cannot differentiate between firms that have never...

There is considerable debate about the impact of health care reform on the growth in medical spending. Medical innovation is thought to be a central contributor to that growth. We argue that there is a unique linkage between reforms that affect output markets for medical care and medical R&D...

When SARS struck Taiwan in the spring of 2003, many people feared that the disease would spread through the healthcare system. As a result, outpatient medical visits fell by over 30 percent in the course of a few weeks. This paper examines how both public information (SARS incidence reports) and...