March 30, 2011

Evidence-based policy

The evidence is clear. Statistics from the United States, Europe, Asia and Africa all point in the same direction: male drivers are more likely to crash their cars than females. Aggressive behaviour, rule-breaking tendencies and a greater willingness to take risks are all thought to contribute. Taken together, male drivers are a riskier bet, and face higher premiums for car insurance as a result.
Last week, the Court of Justice of the European Communities took a wrecking ball to this seemingly evidence-based policy. From December next year, insurance companies will no longer be able to discriminate on the basis of sex: men should see their premiums fall and women will pay more. [...]
The court's decision affects more than car insurance — life assurance premiums paid by men could rise to match those paid by women, where previously they were discounted because men on average die earlier.
And Nature agrees with the court because Nature thinks that policy should not be based only on evidence but "must also take into account social, economic and political factors."
I disagree. We would be better-off if policy were based exclusively on evidence, including social, economic, political and ethical evidence. Evidence tells us that if we impose homogeneous insurance pricing then we will get less insurance and it will be more expensive, contrary to the wishes of potential insurance buyers and society as a whole. Some men may cheer at this particular ruling, but both men and women stand to lose in the long run as the same "anti-discriminatory" criterion "to ensure equality between men and women in access to and provision of goods and services" gets applied in instances other than car and life insurance. And this need not stop at insurance. If men and women are to pay the same prices for the clothes they wear, the books they read or the courses they attend, we will all end up paying higher prices for and getting fewer quantities of clothes, books and education.
I think that Nature's attitude towards "evidence" is due to its ideological stance against the science of economics. For Nature, statistical data on car accidents count as "evidence", while the vast amount of information on how people respond to prices does not.

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