Information about public goods of uncertain value in public health policy
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Some goods in an economy are publicly provided, non-rival in consumption, and uncertain in value. While the traditional conception of public goods of uncertain value as represented by the Arrow-Lind Theorem suggests that policy makers can ignore risk preferences of consumers, the problem of large-scale, non-rival public goods produces different results. This is demonstrated in both the cases where the state of nature only indirectly affects utility through its effect on outcomes and where the state of nature directly affects utility. Information from testing of alternative and complementary medicine is another publicly provided, non-rival good. It decreases or possibly increases consumer welfare depending on whether the consumer views the remedy as a consumption good or a longer-term health capital investment. Finally, an empirical investigation of direct-to-consumer advertising of prescription drugs suggests that advertisements for prescription drugs indicated for ailments both most likely to respond to placebo and most likely to be traditionally treated by alternative remedies both lower the expenditure on prescribed and acquired alternative remedies and increase the number of prescribed and acquired alternative remedies. Tobit models and hurdle models are employed to reach this result, allowing the correlation between monthly advertising expenditures and acquisition of alternative remedies among the people that acquire at least some alternative remedies and those that acquire none to be estimated both jointly and separately.