The Resistance to Empirical Evidence in Economics

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Amy Finkelstein: Is there in economics some kind of active resistance to emphasizing these kinds of empirical results or just a recognition that it's hard to tease out all the causal relationships? She says expanding health insurance can be an easy decision because it'll not only improve people's lives but save us money. But she and her husband have been paying lower premiums every year on the high deductible policy having the ad paid off. AmyFinkelstein: Does this actually make you change your mind about life insurance, health insurance and dental insurance? It really prompted me to try when we bought our first home to get a homeowners insurance policies with as high a deductible as possible.

If you knew exactly when every person was going to die, or require medical care, you could make a killing buying and selling insurance. Nobody knows these things, of course -- the future is hard to predict -- but some people know something about the future that other people don't. This sets up adverse selection: the ability of one party to leverage information another party doesn't have, in order to gain an economic advantage. Economist Amy Finkelstein is an expert in this phenomenon, as well as the usefulness of empirical studies in economic research.

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Amy Finkelstein received her Ph.D. in economics from the Massachusetts Institute of Technology. She is currently John & Jennie S. MacDonald Professor of Economics at MIT. She is the co-director and research associate of the Public Economics Program at the National Bureau of Economic Research, and the co-Scientific Director of J-PAL North America. Among her awards are a MacArthur Fellowship and the John Bates Clark Medal. Her recent book, with co-authors Liran Einav and Ray Fisman, is Risky Business: Why Insurance Markets Fail and What to Do About It.

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