Jeff Ely on the end of asymmetric information

His comment is very good, here is his first major paragraph:

There is no disputing the premise that technological advances are resulting in better information. But better information doesn’t imply more symmetric information. This is true even if the information is available to all parties. Consider genetic testing. A test that is highly predictive of a future disease creates symmetric information about health outcomes but at the same time probably creates asymmetric information about what really matters for market outcomes: the patient’s future health care costs. Indeed, health insurance companies will have exclusive access to a wealth of data that predicts the future costs of an applicant with a given array of genetic markers. Thus what would appear at first glance to level the informational playing field in fact will likely only shift information rents from patients to providers. There is no telling if this will lead to better or worse market outcomes overall.

Do read the whole thing, interesting throughout.  Here is my original essay with Alex.

Here is a David Auerbach Slate article criticizing us, we’re not just wrong, we are “so, so wrong.”  Basically he responds to what his own rigid ideological categories imply what we must have meant, rather than what we actually wrote. Rather than “make regulation obsolete” we wrote: “The American regulatory apparatus is increasingly out of date. It is geared to problems that peaked in the previous generation or even earlier. We should revisit the topic of regulatory reform, with an eye toward making more regulations temporary, or having automatic sunset provisions, unless they are consciously and intentionally renewed for reasons of their continuing usefulness.”

The strangest part of his response comes on the health care issue, where we concede a major point to “the other side” (on policy, not on whether asymmetric information has significantly diminished), but he is simply unable to recognize this and thus he infers we must be saying something wildly wrong (“they seem to suggest that individuals should pay into a policy exactly what they will get out of it”).


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