He studies not homeopathy but US patent medicines in the 19th century. Despite being practically useless, these enjoyed spectacular long-run growth - Professor Troesken estimates that spending on them grew 22 times faster than US GDP between 1810
He studies not homeopathy but US patent medicines in the 19th century. Despite being practically useless, these enjoyed spectacular long-run growth - Professor Troesken estimates that spending on them grew 22 times faster than US GDP between 1810 and 1939. Why?
The answer, he says, is that demand for them was inelastic with respect to failure - people kept buying them even though they didn’t work. This was because the medicines offered enormous consumer surplus; the products were cheap, but the benefits they offered were huge; there’s an analogy here with Pascal’s wager. As a result, when a product failed to work, consumers downgraded the probability that patent medicines generally would work, but still saw a positive expected gain from buying them; the small chance of a big improvement in one’s health is worth paying for.
What’s more, there were several things that stopped consumers learning that the entire industry was useless:
1. Many of the products contained morphine or alcohol, so even though the medicine didn’t make the patient better, it made him feel better for a while. In this regard, patent medicines were superior to homeopathy - and possibly bett