Toward the end of an interesting post on financial complexity, Steve Waldman writes, “The analogy I would choose is finance as placebo. Financial systems are sugar pills by which we collectively embolden ourselves to bear economic risk. As with any good placebo, we must never understand that it is just a bit of sugar. We must believe the concoction we are taking to be the product of brilliant science, the details of which we could never understand.”
Turns out this isn’t true. Not the part about financial complexity serving as an essential cover for risk. The part about placebos.
I.B.S., a chronic gastrointestinal disorder, is one of the most common reasons that people seek medical care. Effective long-term therapies have proved elusive. In Kaptchuk’s study, eighty patients were randomly divided into two groups. Patients in the first group received a placebo pill twice a day; those in the second received nothing. Before the study began, both groups were told that placebos were “inert or inactive pills, like sugar pills, without any medication in them.” They were also informed that placebos have been shown in “rigorous clinical testing to produce significant mind-body self-healing processes.” Patients who received the openly distributed placebo scored far better on standard assessments of their condition than those who received nothing. There were also statistically significant differences in the severity of symptoms.
That’s from Berton Roueche’s report on the frontiers of placebo research.