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Nobel Lecture: The Transformation of Macroeconomic Policy and Research

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Author Info
Edward C. Prescott

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Abstract

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 arms of two trials with different probabilities of assignment to treatment. If there are placebo effects, patients in the higher-probability trial will experience better outcomes simply because they believe that there is a greater chance of receiving treatment. This paper finds evidence of placebo effects in trials of antiulcer and cholesterol-lowering drugs.

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File URL: http://www.journals.uchicago.edu/cgi-bin/resolve?JPE31599
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Publisher Info
Article provided by University of Chicago Press in its journal Journal of Political Economy.

Volume (Year): 114 (2006)
Issue (Month): 2 (April)
Pages: 203-235
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Handle: RePEc:ucp:jpolec:v:114:y:2006:i:2:p:203-235

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  1. Jahyeong Koo & W. Michael Cox, 2006. "An economic interpretation of suicide cycles in Japan," Working Papers 0603, Federal Reserve Bank of Dallas. [Downloadable!]
  2. Parry, Ian W.H., 2006. "Are the Costs of Reducing Greenhouse Gases from Passenger Vehicles Negative?," Discussion Papers dp-06-14-rev, Resources For the Future. [Downloadable!]
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  3. Richard Rogerson, 2007. "Taxation and Market Work: Is Scandinavia an Outlier?," NBER Working Papers 12890, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  4. Bos, Frits, 2007. "Use, misuse and proper use of national accounts statistics," MPRA Paper 2576, University Library of Munich, Germany. [Downloadable!]
  5. Kathryn Birkeland & Edward C. Prescott, 2006. "On the needed quantity of government debt," Working Papers 648, Federal Reserve Bank of Minneapolis. [Downloadable!]
    Other versions:
  6. Marvin Goodfriend, 2007. "How the World Achieved Consensus on Monetary Policy," NBER Working Papers 13580, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  7. Ernst Juerg Weber, 2007. "The Role of the Real Interest Rate in US Macroeconomic History," Economics Discussion / Working Papers 07-01, The University of Western Australia, Department of Economics. [Downloadable!]
  8. Ben J. Heijdra & Jenny Ligthart, 2006. "The Transitional Dynamics of Fiscal Policy in Small Open Economies," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
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