The Welfare Effects of Predictive Medicine∗

The paper tries to estimate the welfare loss due to early revelation of relevant information about individual risk (the ’Hirschleifer effect’) in the case of predictive medicine. Using CRRA preferences with the range of ∗I received useful comments from Georges Dionne, an anonymous referee and the workshop participants. Errors are mine. Financial support from the NSF (Grant No. 0096516) is gratefully aknowledged. †Department of Economics, University of Chicago, and Department of Economics, Columbia University. Email: [email protected]. coefficients that can be found in the litterature, we argue that for ’large’ risks, the loss can be major. We briefly discuss some of the problems raised by the regulatory interventions aimed at alleviating the loss.