The Pandemic in Europe and America

The pandemic evolution now appears to be more worrying in Europe than in America, as illustrated by the graph below reproduced from yesterday’s Wall Street Journal (Marcus Walker, Bertrand Benoit, and Stacy Meichtry, “Europe Confronts a Covid-19 Rebound as Vaccine Hopes Recede,” March 12, 2021). In France, for example, after two very long and restrictive (even tyrannical) national lockdowns, ICUs are close to 80% capacity. The Wall Street Journal explains:

Europe’s efforts continue to suffer from the EU’s slowness in procuring and approving vaccines, production delays at vaccine makers, and bureaucratic holdups in injecting available doses.

The “production delays at vaccine makers” are most likely due to the fact that the EU government has not purchased them in time while, of course, there as in America, individuals and private organizations cannot purchase them.

Those who have read Ayn Rand’s famous novel may wonder if Atlas is shrugging more visibly in Europe than in America. As for those Europeans who put all their faith in an omniscient and all-powerful welfare state, they seem deeply disappointed (although they may be asking for more). In Germany, 30% don’t trust the competence of Angela Merkel’s center-right government and trust even less her center-left parliamentary allies.

The progression of new covid variants in Europe may be an immediate culprit, but a major reason for that is that European governments, under the punctilious EU government, have been slower than the US government in making vaccines widely available to the public.

Yet, the vaccine rollout in America has not been a marvel of federal or state planning. Four months after Pfizer announced the completion of its clinical trial, three months and a half after it started delivering doses to the United States, and three months after the vaccine was approved by the FDA, only 10% of Americans are fully vaccinated and another 10% have received a first dose (according to data from the Wall Street Journal). As far as we can see, this was, although not exactly warp speed, fast enough to prevent the variants from outrunning the building of herd immunity. This relative American success was achieved with much fewer restrictions to individual liberties than in most European countries. Federalism and popular resistance have been a big advantage.

It is notable that Pfizer and its partner BioNTech were not full-fledged participants in Operation Warp Speed. Pfizer did not accept research funding to develop its vaccine. The New York Times explained (“Was the Pfizer Vaccine Part of the Government’s Operation Warp Speed?” November 10, 2020):

In July [2020], Pfizer got a $1.95 billion deal with the government’s Operation Warp Speed, the multiagency effort to rush a vaccine to market, to deliver 100 million doses of the vaccine. The arrangement is an advance-purchase agreement, meaning that the company won’t get paid until they deliver the vaccines. Pfizer did not accept federal funding to help develop or manufacture the vaccine, unlike front-runners Moderna and AstraZeneca.

Pfizer CEO Albert Bourla made that clear (see “Leading Covid-9 Vaccine Makers Pfizer and Moderna Decline Invitations to White Summit ‘Vaccine Summit’,” Stat, December 7, 2020):

Bourla later defended the decision to decline federal research and development funding, citing a desire to “liberate our scientists from any bureaucracy” and “keep Pfizer out of politics.”

Except perhaps for that, the pandemic does not provide a strong confirmation of the benefits of American free enterprise. There may be more free enterprise in America than in Europe, but it’s a matter of degree. In America too, the distribution of the vaccines has been basically a governmental affair. And think about the “price-gouging” laws that have prevented market price adjustments in 42 states, not counting the Defense Production Act at the federal level. (See Rik Chakraborti and Gavin Roberts, “Anti-Gouging Laws, Shortages, and Covid-19,” Journal of Private Enterprise 35:4 (2020), pp. 1-20.)

Perhaps the administrative-welfare state, in both Europe and America, is not as good as we thought?

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Vaccine Adventures

Following up on information that Covid-19 vaccines were available there, I walked into the small Maine pharmacy. I saw nobody inside, not even at the cash register. I continued to the back of the store: nobody manned the two counters of the pharmacist’s hideout. I stood in front of one. After just a few minutes, an employee appeared on the other side.

“Could I see the pharmacist?” I asked.

The pharmacist came.

“I have been told that you have Covid vaccines,” I said.

“We have a waiting list,” she replied.

I asked to be put on it but she would not, or could not, tell me when they were likely to phone me for an appointment. I recognized something like the Canadian health system, under which I lived for decades.

“Is it a matter of days, weeks, months, or years,” I asked.

“Days. At least.”

That looked good, except for the “at least.” In some of the on-line and mortar-and-brick places, there is not even a queue you can get at the back of.

At this stage, the actual vaccines don’t seem to be the problem. In the United States, the manufacturers have delivered twice as many vaccines as have been administered. According to the Wall Street Journal (Jared S. Hopkins and Arian Camp-Flores, “Demand for Covid-19 Vaccines Overwhelms State Health Providers,” February 8, 2021),

[a]lthough state officials often cite limited vaccine supply, manufacturers are producing largely on schedule. Pfizer Inc. and Moderna Inc. since December have supplied about 60 million doses, nearly one-third of the 200 million the companies together must deliver by the end of March.

State governments are supposed to distribute the vaccines that the federal government, after literally monopolizing the market, makes available to them. The length of the queues varies from place to place, perhaps depending partly on the success of whatever entrepreneurship can creep into what is basically a socialized distribution system. One Missouri hospital has a waiting list of 100,000 names and no vaccine left. Queues are not an efficient way to ration demand.

In the former Soviet Union, the government always had an excuse for shortages. The real problem was different: no private property, no market prices to signal scarcities, and no free entrepreneurship to respond to the signals.

In America, once the federal government has purchased them, the Covid vaccines are priced at zero, which implies that government allocation is required. At a zero price, demand is much larger than the quantity that bureaucrats can supply. The fee governments pay providers (hospitals, pharmacies, and such) for administering the vaccines may not be higher than the latter’s cost. For example, Medicare pays about $40 for administering the two doses of the currently available vaccines. In a flash of economic realism, Joe Biden has expressed some concern that this fee may not be sufficient.

It is no consolation that all governments in the “free” world have adopted similar policies. No “American exceptionalism” here.

For Soviet agricultural production, the weather was often the excuse. For Covid vaccines, we are told that “the supply chain” and logistics are the problem. The Wall Street Journal‘s Jennifer Smith reported (“Mass Vaccination Sites Will Mean Scaling Up Logistics Coordination,” January 30, 2021):

Other local health departments might need information technology help to cope with overwhelmed appointment systems, or assistance with planning and sourcing the labor, supplies and procedures needed to administer hundreds of shots a day. “People underestimate that this is a massive logistics operation,” Dr. Wen said. “That type of expertise is often missing in state and local public health.”

But except for governments—that is, political and bureaucratic processes—that should not be an unsurmountable logistics problem. Private businesses without central coordination produce and deliver the food, in innumerable configurations, for the daily meals of 320 million Americans. Recall the Russian official who, shortly after the collapse of the Soviet Union, asked British economist Paul Seabright, “Who is in charge of the supply of bread to the population of London?”

In 2020, Amazon shipped 4.5 billion packages to American consumers—more than 12 million per day. The UPS hub in Louisville, Kentucky has a five-million-square-foot facility for sorting and treating more than 400,000 packages or documents per day. The hub sees 387 inbound or outbound flights daily from the company’s fleet of nearly 600 aircraft. What is more impressive is to think of the millions of individuals around the country and around the world who work in long and diverse supply chains to provide the equipment and inputs necessary for UPS’s operations. We are reminded of Leonard Read 1958 essay I, Pencil, which explains how the manufacture of a simple pencil requires the voluntary cooperation of a multitude of individuals producing, without a mastermind, the zinc, the copper, the graphite, and the equipment to make pencils out of that, and all the equipment for producing that equipment, and so on.

Although working under no central direction, these innumerable people who contribute to the production of pencils or UPS’s equipment and supplies are coordinated by markets (supply and demand) and the prices that signal what is needed where.

Compare this to the federal government’s “centralized system to order, distribute, and track COVID-19 vaccines” in which “all vaccines will be ordered through the CDC” (see the description by Anthony Fauci’s shop: COVID-19 Vaccine Questions and Answers, accessed February 10, 2021), the price for the final consumer is zero, and providers are paid fees determined by bureaucrats. No wonder the distribution runs into problems. The contrary would be surprising.

Note that the vaccine could still be free for the final customer if the federal government had simply subsidized consumers for their vaccine purchases (with vouchers, for example) and had let markets, entrepreneurship, competition, and prices distribute the stuff. And it wouldn’t take ages, luck, and some humility to put one’s hands on the thing—or one’s arm under the syringe.

The consumer who wants a vaccine gets a small taste of what French philosopher Raymond Ruyer, in his 1969 book Éloge de la société de consommation (In Praise of the Consumer Society), described as the difference between a market economy, where the consumer is sovereign, and a planned economy, where the producer runs the show (under government’s control):

In a market economy, demand gives orders and supply is supplicant . . . In a planned economy, supply give orders and demand is supplicant.

« Dans l’économie de marché, la demande est impérieuse, et l’offre suppliante (the supply is supplying). Dans l’économie planifiée, l’offre est impérieuse, et la demande suppliante. »

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Why Is the Vaccine Distribution So Difficult?

Imagine if food were allocated and distributed by the government. Wouldn’t this prevent hunger and famines, which have certainly killed more people than epidemics in the history of mankind? Most students of economics should have a ready answer. The opposite approach—that government allocation is more efficient than the anarchy of the market—is illustrated by the story of the Russian official who, shortly after the collapse of the Soviet Union, asked British economist Paul Seabright, “Who is in charge of the supply of bread to the population of London?” (recalled by Philip Coggan in his recent book More).

There is somebody in charge of the supply of Covid-19 vaccines in the United States, and that is precisely the problem. (That both the federal government and states government are involved is not the basic problem; on the contrary, decentralization prevents the centralization of error and improves the Soviet-inspired distribution system, if only by permitting experimentation.) A Wall Street Journal story sounded the alarm (again) on the dramatic inefficiency of the current distribution system (Elizabeth Findell, Jared S. Hopkins, and Dan Frosh, “Covid-19 Vaccines Are Getting Stuck at the Last Step,” January 17, 2021):

In South Texas, a man slept in his car for two nights straight so he wouldn’t lose his place in a line of hundreds of people at a mass-vaccination event. In Western Kentucky, residents registered for vaccination slots online, only to find when they arrived that their doses had been taken by walk-ins. In New Mexico, state officials scrambled to hire more people to staff a vaccination hotline after it was overwhelmed with callers. …

“It’s crazy that people have to call around to see what different providers have the vaccine, rather than having a central place,” [Texas state REp. Vikky Goodwin Goodwin] said. “People are thinking that we had months and months to prepare for this.”

Isn’t it tragic that such things happen and the same failed government interventions are proposed (like by Ms. Goodwin above) after nearly three centuries of modern economic analysis? When prices don’t clear the market, people wait in line and those at the end of the queue don’t even know if they will get anything when their turn comes. In this respect, the United States is not worse than other regulated countries but it is often not better either.

We should not exaggerate the Sovietization of the American economy. Looking at the throve entrepreneurship deployed by American private businesses during the pandemic suggests that the economy is more resilient than many would have thought. Yet, the trend of the past few decades is unmistakable. Sometimes, it even looks like military Sovietization, from the retired army officer running Operation Warp Speed to president Biden considering deploying the National Guard to set up Covid-19 vaccination clinics.

Even if government intervention is judged necessary in a pandemic, less Sovietized and more efficient ways would be more productive. The federal government could buy enough Covid-19 vaccines from the manufacturers by bidding up prices to obtain enough for the whole population—that is, by bidding high enough to divert enough economic resources to manufacturing and shipping these vaccines. It could then offer the vaccines for free to interested health providers and pay the shipping by Fedex and UPS. Even better,  the government (at the federal or state levels) could offer vouchers to anybody who wants the vaccine and let Amazon (or any retailer) buy the vaccines and sell them in exchange for the vouchers or for ordinary cash from those who are willing to pay. With tens of thousands of intermediaries with incentives to deliver the vaccines because it pays to do so, the distribution would proceed like for food or computer equipment.

The trick is to allow the market to clear as fast as possible. Even the government’s preferred clientèles would be better served by a liberalization of entrepreneurship and a large measure of economic freedom.

It would go less smoothly in states, such as New York State, that have set up their own Soviet-style allocation of vaccines, but individuals could at least cross state lines to buy a vaccine if they want. And competition would, to a certain extent, push state governments not to hamper private distribution.

If ordinary economic markets are not allowed to clear, expect the political market to clear with the help of patronage, random access, and waste. We have seen much of that since the beginning of the pandemic. It would not be surprising if, as recently reported, a large number of vaccines are trashed because not enough government-prioritized recipients are available at any given time or place. (See also Scott Sumner, “Regulation and Vaccines: It’s Much Worse Than You Think,” Econlog, January 17, 2021, who correctly defends a free market in vaccines.)

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