Ask a Nobel Laureate: Can Everyone Benefit from Universal Mandate?

Lecture 2: Public Finance III @ Stanford University


Imagine you’re running an insurance company. How would you turn a profit?

There are two obstacles, however.

Adverse Selection: The Need for Universal Mandate

This is a Nobel-worthy question. Professor Stiglitz received the Nobel laureate in Economics in 2001 for “ laying the foundations for the theory of markets with asymmetric information” with George Akerlof and Michael Spence.



If Company Can Tell People Apart…

If Company Can’t Tell People Apart…

Key Insight

This is the original inspiration for universal mandate.

Akerlof Model


Death Spiral

A Mandate Can’t Make Everyone Better Off

Key Remarks

Data Analysis: Adverse Selection

Detecting Adverse Selection

Is Adverse Selection a Big Deal?

Studying Non-Existing Markets

What Have We Learned Today?



Next Time



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