The Becker Friedman Institute for Economics (BFI) serves as a hub for cutting-edge analysis and research across the entire University of Chicago economics community, uniting researchers from the Booth School of Business, the Kenneth C. Griffin Department of Economics, the...
Inspired by our namesakes, Nobel Laureates Gary Becker and Milton Friedman, who believed that economics research could help improve the world, BFI works with the Chicago Economics community to turn its evidence-based research into real-world impact.
EDE is a University of Chicago Summer Institute designed to identify and support talented undergraduate students from a broad range of backgrounds interested in the study of economics.
Standard rational learning models with information frictions can explain consumers’ heterogeneous macroeconomic beliefs but not their systematic bias. Using novel data on 47,000 consumers across 47 countries representing 90% of global GDP, we document novel facts that can inspire realistic...
Lubos Pastor, Robert F. Stambaugh, and Lucian A. Taylor
We quantify the U.S. corporate sector’s carbon externality by computing the sector’s “carbon burden”—the present value of social costs of its future carbon emissions. Our baseline estimate of the carbon burden is 131% of total corporate equity value. Among individual...
When does a Sender, in a Sender-Receiver game, strictly value commitment? In a setting with finite actions and finite states, we establish that, generically, Sender values commitment if and only if he values randomization. In other words, commitment has no...
Buying Cures vs. Renting Health: How Financial Engineering Can Expedite Medical Breakthroughs
Cocktails and Conversations with Andrew W. Lo
Apr272016
Recent breakthroughs in biomedicine have yielded transformational therapies for cancer, hepatitis, C, and several rare and deadly diseases—in some cases, we now have cures. These cures do not come cheap, either for patients or for drug makers who invest in their discovery and development. At the heart of these financial challenges is a mismatch between cost and benefit—large upfront costs lead to benefits over time—and this mismatch can discourage innovation and prevent patients from getting access to potentially life-saving therapies. In this talk, Andrew Lo reviewed these challenges and described how novel applications of well-known financial engineering techniques to healthcare contexts can overcome these challenges. Using portfolio theory, securitization, credit default swaps, and other standard tools of the financial industry, we can reinvent the biopharma industry to yield many more transformative therapies at lower cost, lower risk, and in less time.
Support
This event was supported by Mesirow Financial and the institute’s Health Economics initiative.