Theory vs. Data (was: Greenstar <--- MUST SEE)

From: Robin Hanson (
Date: Mon Jun 26 2000 - 11:23:34 MDT

At 09:07 AM 6/26/2000 -0700, you wrote:
> > Comparisons across poor
> > countries, regions, and individuals almost never show any substantial
> > health effect of variations in medical spending or water and sanitation.
>I think the problem here is that this result is so surprising, so
>unintuitive, that it is hard for people to believe it, or at least to
>fully internalize the belief and build on it.

This is a reason I am an applied theorist. Almost all health economics
and policy is done by empiricists. But the results these empiricists
communicate to others are dominated by the simple theories they hold.
Even when data clearly and repeatedly imply things at odds with their
simple theories, they just don't internalize them much, and so don't
communicate them well to others. So when they go make policy
recommendations, they are driven by their simple theories, even when
those theories are directly at odds with robust data.

The basic fact is that we have data robustly and strongly at odds with
standard simple theories, and that most health policy advice ignores
that data. As another example, there is basically no adverse selection
in insurance when insurance companies are free to price based on what
they know. And yet policy advice is driven by fixing adverse selection.

My best health theory attempt so far is:

>We are accustomed to paradoxical results these days. You can find
>thousands of web pages explaining why simultaneity varies between moving
>observers, or how something can be a particle and a wave at the same time.
>But where can you find an explanation of why giving people clean water
>and good health care for the first time won't improve their health?
>It flies in the face of intuition just as much as those physics phenomena,
>and is really far more relevant to our daily lives.

Here you run into another problem: people are very reluctant to believe
counterintuitive results from the social sciences. Physicists can say the
strangest things, and people will say "isn't that cool", but if economists
say that minimum wages reduce employment, the response is "what do you know."

Robin Hanson
Asst. Prof. Economics, George Mason University
MSN 1D3, Carow Hall, Fairfax VA 22030
703-993-2326 FAX: 703-993-2323

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