Everyday economics: Oster is the Dear Abby of diminishing marginal utility. (Photography by Vincent Vernet)

Utility research

Emily Oster applies economic principles to all of life’s questions.

Imagine you were at high risk for a debilitating disease that would substantially shorten your life, and that a genetic test would tell you whether or not you would develop the disease. Would you take the test?

“Standard economic theory suggests that you should get the test,” says economist Emily Oster, who examined the question for an April American Economic Review study. “It would be informative about the choices you’d like to make in your life. ... If I know I’m only going to live to 60, maybe I’d want to retire at 50 and do something fun.”

In reality you likely wouldn’t take the test, Oster says. An associate professor at Chicago Booth, she brings an economist’s eye to health behaviors around the globe, from STDs to the availability of medical care for women and children in India. For the American Economic Review paper, Oster and two physicians from Georgetown and Johns Hopkins looked at people at risk for Huntington’s disease, a degenerative brain disorder that causes uncontrolled movements and cognitive problems and shortens life expectancy. Those who have a parent with Huntington’s have a 50 percent chance of developing the disease. A blood DNA test can definitively tell whether they will or won’t.

Most choose not to be tested—a stark contrast to the preferences at-risk people expressed before they had that option. In surveys conducted before the Huntington’s test came out in the 1990s, about two-thirds of respondents said yes, they’d want to be tested. “After the test was available, they actually didn’t want it.”

Over a ten-year period, fewer than 10 percent of the 1,001 people Oster studied—Americans and Canadians, each of whom had a parent, sibling, or child with the disease—elected to be tested. To Oster this suggests that people find greater comfort in not knowing. “If you step out of the economics box and step into a person box,” she says, the results aren’t so surprising. “People derive utility and happiness from imagining the future.” Testing would take that away.

One of a growing number of economists bringing their scholarship to bear on other fields of study—among them UChicago colleague and Freakonomics coauthor Steven Levitt—Oster has always been interested in science. She spent a college summer working with fruit flies in a lab. Now she reads medical literature for fun and inspiration. One current project explores why US infant mortality rates are substantially worse than those in Europe, and whether home nurse visits, routine in Europe but mostly absent in this country, play a role. “We have very good neonatal intensive care units; we do very well with premature births,” Oster says. “For that period where you’re engaged with a hospital, the United States looks just as good as Finland or Austria.” But after the babies go home, infant mortality rates diverge. “Between one month and one year we’re looking terrible.”

And like some other economists straddling multiple disciplines, Oster has stirred up occasional controversy. A 2005 paper, written when she was a graduate student at Harvard, argued that hepatitis B was a major—and overlooked—reason that men outnumber women in China. That conclusion turned out to be mistaken, and three years later Oster wrote a follow-up paper retracting her findings.

Another 2005 study, on Africa’s HIV epidemic, flew in the face of conventional scientific wisdom, which focused on reducing specific risky behavior. Using simulation models, she found that the difference in HIV incidence between sub-Saharan Africa and the United States had more to do with transmission rates than with sexual behavior. Education campaigns in Africa had worked—they indeed reduced the incidence of high-risk behavior to levels found in the United States. Transmission rates remained higher because of open sores associated with other untreated STDs. Combating diseases like herpes, she concluded, would more effectively reduce HIV infections than additional efforts directed at HIV itself.

The study made waves and earned “a lot of push back,” she says. “I think it would have been more influential if I’d found a better way to communicate with the guys in epidemiology and public health. I was pretty young.” In the end she issued a correction to calculation errors that altered some figures and data tables but did not, she says, affect her central conclusions. In 2012 she took up the subject again, publishing a study in the Journal of the European Economic Association that found that when African countries’ trade exports rose, so did their rates of new HIV infections.

Oster’s writing—and the controversy surrounding it—extends beyond academic journals. Her work has appeared in Esquire and Slate, on topics from why Doctor Barbie costs more than Magician Barbie to how to most efficiently divide household chores. In a  January column for Slate, Oster weighed the question of working less so she could spend more time with her two-year-old daughter. Applying the economic principle of diminishing marginal utility, she concluded that eight hours at the office and three hours at home was the split that made her happiest, even though her family gives her more joy than her work. Slate’s comments section erupted with dissents.

Later this year Penguin will publish Expecting Better, Oster’s book offering advice to expectant parents on how to make evidence-based decisions about medical care. “When you are pregnant,” she says from her own experience, “there are lots of rules and a lot of doctors saying you should do this and not that, and there is usually very little evidence.” In the book she explores the true risks of drinking alcohol, eating sushi, and invasive testing for Down syndrome.

Oster’s own parents set her up early for a life guided by curiosity and research that explores unusual territory. Both economists, they recorded her chattering in her crib after they turned off the light and said good night. Those recordings eventually became the basis of Narratives from the Crib, a study by four developmental psychologists, a psychiatrist, and a linguist about how children acquire linguistic skills. Like many of Oster’s own studies, it had a surprise finding that upended the thinking on child development: her speech was much more sophisticated when she was alone than when talking with her parents. 

Now Oster is married to another economist—Jesse Shapiro, also on the Chicago Booth faculty. And whether her readers agree or disagree with her arguments, interest in her analytical approach to everyday life is strong. In March the Wall Street Journal launched Ask Emily, an advice column based on economic principles. “So ask away,” she wrote in her introductory column. “I’m here to optimize your life.”