A normal market

Originally published in European Economic Review

Historical markets were often ones of symmetric but inaccurate information: buyers and sellers had similar information, but because knowledge was scant and unscientific, the information they had was false. These markets were “normal” in the same sense as classical markets of symmetric and accurate information. With hindsight, however, they are easily mistaken for markets of asymmetric information. I use novel data to study one such market: the market for patent medicine in Industrial Revolution England. I find that: (1) Patent medicine consumers and medical professionals had similar but false medicinal information. (2) Patent medicine ingredients and claims were consistent with professional medicine. (3) Patent medicine producers believed in their medicines’ efficacy and credibly informed consumers of their belief. Conventional wisdom that this market was deceptive perceives it with medical hindsight and thus misapprehends the market as one of asymmetric information. Viewed in the context of Industrial Revolution-era medical knowledge, the market for patent medicine was normal.

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