Using Information Markets to Improve Public Decision Making

Information markets are markets for contracts that yield payments based on the outcome of an uncertain future event, such as a presidential election. The prices in these markets provide useful information about a particular issue, such as a president's reelection probability. The purpose of this paper is to suggest how the use of information markets can improve the quality of public policy. Our central contribution is to propose an efficient way to implement well-informed policy decisions. We do this by linking and building upon the literatures on information markets and mechanism design. Our claim is that the prices in information markets can inform the mechanism design process, thereby making previously infeasible mechanisms feasible for the policy maker. Specifically, information markets make pay-for-performance contracts viable in the policy domain. Although we focus on public sector decision making, the analysis is sufficiently general to apply to a wide range of problems in private sector and not-for-profit decision making. The framework can be applied to any situation in which a decision maker has the resources, but not the necessary information and ability, to achieve his specified objective. First, we show how it is generally possible to design contracts based on different contingencies whose prices will convey useful information on the costs and benefits of a number of policy choices, ranging from regulation to public works projects. Second, we describe one way of providing incentives for self-interested agents to implement policies that maximize net social benefits. Third, we show how information markets can be used to provide a stronger foundation for implementing a variety of government oversight mechanisms, such as a regulatory budget. We also show how legislators can use traditional budgetary controls in conjunction with information markets to exercise more effective oversight. Finally, we identify and analyze the strengths and limitations of using information markets to help improve policy. To make the analysis concrete, we examine how the "Copenhagen Consensus" which makes recommendations on spending $50 billion wisely, could have benefited from applying information markets. We argue that there is a large scope for expanding the use of information markets. These markets could promote greater transparency in governmental decision making, provide more accurate estimates of the efficiency and distributional impacts of different policies, provide a better understanding of uncertainties, help with sensitivity analysis, offer a low-cost way of assessing new policy proposals, finance government projects and regulations with positive net benefits, allow those affected by specific policies the opportunity to hedge risk, and aid in the design of policies. Furthermore, information markets can help assess the value of additional research on the decision to undertake a project. At the same time, we suggest that there are important limits to the application of information markets. We also suggest how government could play an important role in the expansion of information markets and researchers could help in the development and assessment of these markets.

Does Provision of an Evidence-Based Information Change Public Willingness to Accept a Screening Test ?

The basic requirement for patient decision making is the provision by the physician of an essential relevant and understandable information (Evidence Based) allowing him to decide whether he wish or not to receive the proposed treatment. This analysis shows that the willingness to undergo a doubtful screening test (about 70 % false positive responses) for a rare cancer by the general population change dramatically (60% versus 13,5%) according to the quality of information provided. This result, facing the impressive increase of diagnostic and screening procedures, could have important economical, ethical, clinical, public health and legal implications.health care markets; information; decision making; doctor-patient relationship; screening; diagnostic procedures; evidence based medicine; public health

The Promise of Prediction Markets

Prediction markets are markets for contracts that yield payments based on the outcome of an uncertain future event, such as a presidential election. Using these markets as forecasting tools could substantially improve decision making in the private and public sectors. We argue that U.S. regulators should lower barriers to the creation and design of prediction markets by creating a safe harbor for certain types of small stakes markets. We believe our proposed change has the potential to stimulate innovation in the design and use of prediction markets throughout the economy, and in the process to provide information that will benefit the private sector and government alike.Technology and Industry

Experimental Economics

This is the first comprehensive treatment of laboratory experiments designed to evaluate economic propositions under carefully controlled conditions. While it acknowledges that laboratory experiments are no panacea, it argues cogently for their effectiveness in selected situations. Covering methodological and procedural issues as well as theory, Experimental Economics is not only a textbook but also a useful introduction to laboratory methods for professional economists. The emphasis is on organizing and evaluating existing results. The book can be used as an anchoring device for a course at either the graduate or advanced undergraduate level. Applications include financial market experiments, oligopoly price competition, auctions, bargaining, provision of public goods, experimental games, and decision making under uncertainty. The book also contains instructions for a variety of laboratory experiments.laboratory experiments, financial markets, price competition, auctions, bargaining, games, decision making, uncertainty

Analyzing the Determinants of the Matching Public School Teachers to Jobs: Estimating Compensating Differentials in Imperfect Labor Markets

Although there is growing recognition of the contribution of teachers to students' educational outcomes, there are large gaps in our understanding of how teacher labor markets function. Most research on teacher labor markets use models developed for the private sector. However, markets for public school teachers differ in fundamental ways from those in the private sector. Collective bargaining and public decision making processes set teacher salaries. Thus it is unlikely that wages adjust quickly to equilibrate the supply and demand for worker and job attributes. The objective of this paper is to develop and estimate a model that more accurately characterizes the institutional features of teacher labor markets. The approach is based on a game-theoretic two-sided matching model and the estimation strategy employs the method of simulated moments. With this combination, we are able to estimate how factors affect the choices of individual teachers and hiring authorities, as well as how these choices interact to determine the equilibrium allocation of teachers across jobs. Even though this paper focuses on worker-job match within teacher labor markets, many of the issues raised and the empirical framework employed are relevant in other settings where wages are set administratively or, more generally, do not clear the pertinent markets for job and worker attributes.

Not all financial regulation is global

Financial regulation at global level has been high on the G20 agenda. However, financial multipolarity, with the rise of emerging economies, and its impact on decision-making at global level has made global convergence difficult. In this policy brief, the authors, Bruegel Senior Fellow Nicolas Véron and Stéphane Rottier, National Bank of Belgium, explain why now is the time to focus on building stronger global public institutions, ensuring globally consistent financial information, creating globally integrated capital-markets infrastructure and addressing competitive distortions among global capital-market intermediaries to set the foundation for global harmonisation of all aspects of financial regulation.

The Economics of Lotteries: A Survey of the Literature

Lotteries represent an important source of government revenues in many states and countries, so they are of interest to public finance economists. In addition, lotteries provide researchers interested in microeconomic theory and consumer behavior with a type of experimental lab that allows economists to explore these topics. This paper surveys the existing literature on lotteries organized around these two central themes. The first section examines the microeconomic aspects of lotteries including consumer decision-making under uncertainty, price and income elasticities of demand for lottery tickets, cross-price elasticities of lottery ticket to each other and to other gambling products, consumer rationality and gambling, and the efficiency of lottery markets. The second section covers topics related to public finance and public choice including the revenue potential of lotteries, the tax efficiency and dead-weight loss of lottery games, the horizontal and vertical equity of lotteries, earmarking and the fungibility of lottery revenues, and individual state decisions to participate in participate in public lotteries.lotto, lottery, public finance, gambling

Factors influencing delays in patient access to new medicines in Canada: a retrospective study of reimbursement processes in public drug plans

© 2019 Salek, Lussier Hoskyn, Johns, Allen and Sehgal.Individuals who rely on public health payers to access new medicines can access fewer innovative medicines and must wait longer in Canada compared to major markets around the world. New medicines/indications approved by Health Canada and reviewed for eligibility for reimbursement by the Common Drug Review or the pan-Canadian Oncology Drug Review (CDR/pCODR) from the beginning of 2012 through to the end of December 2016 were analyzed, with data taken from the relevant bodies’ websites and collected by IQVIA. This analysis investigated individual review segments – Notice of Compliance (NOC) to Health Technology Assessment (HTA) submission, HTA review time, pan-Canadian Pharmaceutical Alliance (pCPA) negotiation time, and public reimbursement decision time, and analyzed the trends of each over time and contributions to overall time to listing decisions. Average overall timelines for public reimbursement after NOC were long and most of this time is taken up by HTA and pCPA processes, at 236 and 273 days, respectively. This study confirms that Canadian public reimbursement delays from 2013-2014 to 2015-2016 lengthened from NOC to listing (Quebec + 53%, first provincial listing + 38%, and country-wide listing + 22%), reaching 499, 505, and 571 days, respectively. Over the same period, time from NOC to completion of HTA has increased by 33%, and time from post-HTA to first provincial listing by 44%. The pCPA process appears to be the main contributor to this increasing time trend, and although some provinces could be listing more quickly post-pCPA, they appear to be listing fewer products. Reasons for large delays in time to listing include the many-layered sequential process of reviews conducted before public drug plans decide whether to provide access to new innovative medicines. Although there has been some headway made in certain parts of the review processes (e.g., pre-NOC HTA), total time to listing continues to increase, seemingly due to the pCPA process and other additional review processes by drug plans. More clarity in the pCPA and provincial decision-making processes and better coordination between HTA, pCPA, and provincial decision-making processes is needed to increase predictability in the processes and reduce timelines for Canadian patients and manufacturers.Peer reviewedFinal Published versio

Procurement in infrastructure : what does theory tell us ?

Infrastructure has particular challenges in public procurement, because it is highly complex and customized and often requires economic, political and social considerations from a long time horizon. To deliver public infrastructure services to citizens or taxpayers, there are a series of decisions that governments have to make. The paper provides a minimum package of important economic theories that could guide governments to wise decision-making at each stage. Theory suggests that in general it would be a good option to contract out infrastructure to the private sector under high-powered incentive mechanisms, such as fixed-price contracts. However, this holds under certain conditions. Theory also shows that ownership should be aligned with the ultimate responsibility for or objective of infrastructure provision. Public and private ownership have different advantages and can deal with different problems. It is also shown that it would be a better option to integrate more than one public task (for example, investment and operation) into the same ownership, whether public or private, if they exhibit positive externalities.Public Sector Economics&Finance,Debt Markets,Infrastructure Economics,Contract Law,Transport Economics Policy&Planning