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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I, Vaccine: How to Appreciate the Beautifully Simple

What a marvelous spectacle we have enjoyed this week, as the first wave of Covid-19 vaccines began shipping from Pfizer’s facilities in Michigan. Watching the news with my pre-teen son, as those box trucks rolled away carrying such precious frozen cargo, he said, “Wow, I bet that truck driver feels pretty good about his job right now.”  I nodded and replied, “Well said, son. I think maybe this is something we can all feel good about.”

Who can’t feel good about the mind-blowingly short duration it’s taken to develop a safe and effective vaccine? For the same reason, we should also be amazed at the complexity of its distribution. The Wall Street Journal captures the point

The effort to vaccinate the nation relies on chemists, factory workers, truck drivers, pilots, data scientists, bureaucrats, pharmacists and health-care workers. It requires ultracold freezers, dry ice, needles, masks and swabs converging simultaneously at thousands of locations across the country. To work, every one of the many and complicated links of the chain has to hold.

 

The distribution has been widely described as the biggest mobilization since World War II. Bravo!, I say. We need some awe-inspiring words to befit this marvelous spectacle. 

And yet, the vaccine itself is a relatively simple compound. It consists of Pfizer’s modified mRNA plus seven inactive ingredients as common as table sugar. The mRNA itself stands as an unprecedented achievement. Yet the compound is ordinary, even elegantly so. And it will save millions. What beauty in the simple!

For many, this facet of the story evokes the classic essay with the curious title, “I, Pencil: My Family Tree as Told to Leonard Reed”. Originally published in 1958, this essay skillfully describes the materials that comprise an ordinary pencil, and the far reaches of the world whence those materials source. It also artfully describes the innumerable people around the world whose daily work contributes crucially to putting ordinary items such as pencils on nearby stores’ shelves.

That’s exactly how the WSJ describes the Pfizer mobilization. The vaccine must arrive at the right time in the right condition at thousands of locations around the country. And the efforts of myriad numbers of people from faraway places contribute to the mobilization. When you start to think about it, the amount of human coordination being achieved is astounding. It makes my son and me want to ask: Who designed such a marvelous plan? Who deserves credit for taking charge of this? The surprising answer that comes to us from the pencil is: no one! Leonard Reed’s ordinary little friend conveys the idea himself.

I, Pencil, am a complex combination of miracles: a tree, zinc, copper, graphite, and so on. But to these miracles which manifest themselves in Nature an even more extraordinary miracle has been added: the configuration of creative human energies—millions of tiny know-hows configurating naturally and spontaneously in response to human necessity and desire and in the absence of any human master-minding!

 

And again, the WSJ informs us exactly how this applies to how this week’s vaccine mobilization.

‘Everything has to come together—the packaging, the dry ice, the vials, the material itself. It all has to come together to the same place and have enough of it and exactly the right people there ready to take it,’ said Yossi Sheffi, director of the MIT Center for Transportation & Logistics. ‘Right now, there’s no conductor to the symphony,’ just many parts that each need to work.

 

This reflects the time-tested idea in economics that great things for humanity can be the result of people self-organizing through markets because they’re free to do so. Reed is channeling economics Nobel Laureate F. A. Hayek, whose 1945 article, “The Use of Knowledge in Society” describes market prices as a mechanism of human coordination that deserves to be marveled at.

I have deliberately used the word “marvel” to shock the reader out of the complacency with which we often take the working of this mechanism for granted. I am convinced that if it were the result of deliberate human design, and if the people guided by the price changes understood that their decisions have significance far beyond their immediate aim, this mechanism would have been acclaimed as one of the greatest triumphs of the human mind. Its misfortune is the double one that it is not the product of human design and that the people guided by it usually do not know why they are made to do what they do. But those who clamor for “conscious direction”—and who cannot believe that anything which has evolved without design (and even without our understanding it) should solve problems which we should not be able to solve consciously—should remember this: The problem is precisely how to extend the span of our utilization of resources beyond the span of the control of any one mind; and therefore, how to dispense with the need of conscious control, and how to provide inducements which will make the individuals do the desirable things without anyone having to tell them what to do.

Hayek is in turn channeling Adam Smith who pioneered the idea that people’s liberty to specialize and trade explains much of the wealth of nations. When people are free to truck, barter, and exchange according to their own terms, markets tend to happen, and price coordination tends to follow. For Smith, an invisible hand channels individual self-interest toward these broader gains. Toward a better life. 

This old idea is discussed in today’s economics textbooks with section headings like “comparative advantage” or “gains from trade,” and in some books as “price coordination”. Critics count the idea as dogma, but most economists take it as one of the cornerstones of our trade. This is why, for example, most economists oppose tariffs.

If that doesn’t impress you, try this other facet. Consider that each recipient of the vaccine has effectively harnessed the myriad efforts of the scattered multitudes. Imagine it is your turn next. Now imagine for a moment what it would feel like to employ millions of workers around the globe and to funnel all their efforts directly toward you in the form of a single and concentrated dose of betterment to your own well-being. See, that didn’t hurt at all. Congratulations, you’ve just received your Covid-19 inoculation, thanks in part to the invisible hand.

 

My pre-teen son has a long life ahead of him, I hope. How much better will it be than mine? If you ask our ordinary little friend the pencil, the recipe for human flourishing is pretty simple. Just add one part specialization according to comparative advantage, add a bit of faith in free people, and let the good stuff rise as people better themselves through price coordination. Economic freedom is amazingly complex, and so is the vaccine marvel.  Yet they both are beautifully simple, too. That’s something we can all feel good about.

 

Don’t get me wrong. Central planning is a major player in the success story we’re watching unfold. Vaccines are classically known to have inefficiencies on both the production and consumption sides, and non-price rationing is determining their allocation. It’s not like Pfizer is harnessing price-induced information to decide where shipments go. But still, there is pretty intense competition among vaccine suppliers. And there is something we can all feel good about here. Maybe even marvel at here. And much of it owes itself to the social coordinating force of market prices and globalized trade.

 


Edward J. Lopez teaches economics at Western Carolina University, where he is also director of the Center for the Study of Free Enterprise. His research focuses on the dynamics of legal and political institutions. His recent publications include “Informal Norms Trump Formal Constraints: The Evolution of Fiscal Policy Institutions in the United States” (Journal of Institutional Economics, 2017, with Peter T. Calcagno), and Madmen, Intellectuals, and Academic Scribblers: The Economic Engine of Political Change (Stanford University Press, 2013, with Wayne A. Leighton). He is Executive Director and Past President (2012-2014) of the Public Choice Society.

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Vaccines’ Last Hurdle: Central Planners

Urgently needed drugs developed under Operation Warp Speed are at the mercy of officials working at “bureaucrat speed.”

I rarely like the titles that editors choose for my op/eds and articles. But this title that my Hoover editor chose is way better than mine.

Here are the first three paragraphs of “Vaccines’ Last Hurdle: Central Planners,” Defining Ideas, December 4, 2020:

First, the good news. We now appear to have at least two viable vaccines with high efficacy in preventing the awful disease known as COVID-19. On November 9, Pfizer/BioNTech announced that the efficacy of its vaccine exceeds 90 percent. On November 16, Moderna announced that its vaccine’s efficacy exceeds 94.5 percent. Take that, Pfizer! Seriously, though, both announcements are great news. Let’s put those percentages in perspective. I get a flu vaccine every year without fail. Is that because the vaccine is 90 percent effective? No. At best, it’s 60 percent effective, and its effectiveness is often well below 50 percent.

There’s even more good news. Even when the vaccines don’t prevent COVID-19, they make it substantially less severe. For example, in a study of thirty thousand volunteers for the Moderna test, of the eleven cases in people who got the vaccine, no case was severe, versus thirty severe cases for people who received the placebo. It’s risky to generalize from a sample size of thirty thousand, but still, the numbers are extremely encouraging. There’s also good news for us elderly. I was talking with a healthy seventy-seven-year-old woman at pickleball last week who was delighted that she, as an elderly person, would be one of the first to get it. I just turned seventy and my wife is seventy-one, and so presumably we will be on the priority list.

But the bad news for people who live in California is that California’s state government will slow things down. This might happen in New York and in some other states also. Let’s start by focusing on California, the state I know best. California’s government will slow things down in two ways: one is intentional and the other is unintentional.

Read the whole thing.

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