Regulation: It’s much worse than you think

The distribution of vaccines is being held up by regulation. But I suspect that even opponents of regulation underestimate its pervasive effects. Regulation goes far beyond things like price controls and mandates regarding distribution, it extends into all aspects of our society (including the “private” sector), in ways that many people don’t even think about. Let’s start with health care:

1. We have a tax system that pushes people into gold-plated health insurance plans, and then the government regulates the way that those plans can operate. That problem was made dramatically worse by the recent decision of Congress and the President to kill the so-called “Cadillac tax”, which would have gradually eliminate the tax subsidy for health insurance.

2. We have many controls on entry into the provision of health care, which drive up costs in numerous ways.

3. Ever get a severe toothache on a Friday night, and be unable to visit a dentist for relief until Monday? I have. In 1910, I could have walked to the local drug store and bought some serious pain relief. Not today.

4.  Fear of lawsuits.  Many of the practices that make life in America both frustrating and inefficient are driven by a fear of lawsuits.  Yes, lawsuits play a valuable role in enforcing contracts, even implicit contracts.  But firms should also be able to have consumers and workers sign agreements not to sue under certain conditions.

5.  Price controls that create shortages.

I wonder if even sensible regulation skeptics like Tyler Cowen realize just how bad things are. In a recent post, he suggests we should praise the UK’s efforts in distribution the vaccine.  But the UK has done a horrendous job of distributing the vaccine; indeed Israel is doing the job 5 times faster.

So why does Tyler praise the UK? Because almost every country in the world is screwing up even worse than the UK. Regulation has made things so bad that even “pretty inept” starts to look good on a comparative scale.

[And don’t say, “Israel is small”.  Israel is roughly the size of many American states (such as New Jersey), each of which is doing a horrible job.]

Here’s another example:

A hospital Covid-19 vaccination team shows up at the emergency room to inoculate employees who haven’t received their shots.

Finding just a few, the team is about to leave when an ER doctor suggests they give the remaining doses to vulnerable patients or nonhospital employees. The team refuses, saying that would violate hospital policy and state guidelines.

Incensed, the doctor works his way up the hospital chain of command until he finds an administrator who gives the OK for the team to use up the rest of the doses.

But by the time the doctor tracks down the medical team, its shift is over and, following protocol, whatever doses remained are now in the garbage.

Isolated incident? Not a chance, Dr. Ashish Jha, dean of the Brown University School of Public Health, told NBC News.

“This kind of thing is pretty rampant,” Jha said. “I have personally heard stories like this from dozens of physician friends in a variety of different states. Hundreds, if not thousands, of doses are getting tossed across the country every day. It’s unbelievable.”

People consistently underestimate the responsiveness of industries to market signals.  I’d be happy to pay $2000 to get a vaccine today, rather than have to wait a few months.  Yes, health care workers are overworked.  But if I offered a nurse $2000 to give me a jab on the way home from a grueling 12-hour shift, would he refuse?

People gave Charles Barkley a hard time for suggesting that NBA players should get priority.  But why not? They are highly productive.  I don’t recall many people criticizing President Trump for getting special treatment when he contracted Covid, and I’d say the average NBA player is more productive than Donald Trump. So why the double standard?  BTW, if the NBA shuts down then lots of average workers also lose their jobs.

I could understand the “social solidarity” argument against a free market if this were a zero sum game.  But as Israel has demonstrated, the inefficient distribution of vaccines is a negative 80% game, that is, we are vaccinating 80% smaller share of our population than Israel. Yes, eventually we’ll catch-up.  But time is of the essence.

Under a free market, most people would receive vaccines sooner than under our current system.  Thousands of lives would be saved.  Perhaps it might seem a bit less “fair”, but what is fair about needlessly killing thousands of people just to be politically correct?  The price would likely fall sharply once the first few tens of millions were vaccinated.  And if there are some people too poor to pay for vaccines, then we have public charities like Medicaid and private charities like the Bill Gates Foundation.  As the Maoist experiment in China demonstrated, egalitarian intentions are not enough—you need incentives to produce goods and services.

People seem almost hardwired to resist the idea of deregulating health care.  Whenever there is a problem, they instinctively reach for even more regulation.  The FT has a long article discussing all the ways that bureaucrats have screwed up the distribution of vaccines, which ends as follows:

But some worry it is too late for money to have much of an impact and argue that the federal government should take control of the process rather than leaving it to states.

“The federal government could send a few thousand vaccinators,” Ashish Jha, dean of the Brown University school of public health. “They have a public health workforce. They’re just not for reasons that neither I nor the states can figure out.”

So the federal government has completely screwed up “for reasons that neither I nor the states can figure out” and thus we can conclude that “the federal government should take control of the process”?  Hmmm.

Here’s another thought.  Doesn’t this quote suggest that capacity limits are not the core problem?  We have “thousands” of vaccinators who are available but for some strange reason are not being used.

This is the whole point of markets.  To connect up desperate consumers with unmotivated providers.  The price system will provide the motivation that providers need to speed up the process.  You may find free markets in health care to be distasteful, but you should find thousands of needless deaths to be even more distasteful.

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Noubar Afeyan on Academia, Business, Immigration, and the American Dream

Tyler Cowen has posted an outstanding interview of Noubar Afeyan, co-founder of Moderna, which produces one of the two COVID-19 vaccines approved so far by the Food and Drug Administration. Tyler is at the top of his game, asking really good questions, and you can just see the respect that that creates in Afeyan.

Some highlights follow.

On individualized medicine

We have a program in cancer vaccines. You might say, “What does a cancer vaccine have to do with coronavirus?” The answer is the way we work with cancer vaccines is that we take a patient’s tumor, sequence it, obtain the information around all the different mutations in that tumor, then design de novo — completely nonexistent before — a set of peptides that contain those mutations, make the mRNA for them, and stick them into a lipid nanoparticle, and give it back to that patient in a matter of weeks.

That has been an ongoing — for a couple of years — clinical trial that we’re doing. Well, guess what? For every one of those patients, we’re doing what we did for the virus, over and over and over again. We get DNA sequence. We convert it into the antigenic part. We make it into an RNA. We put it in a particle. In an interesting way, we had interesting precedents that allowed us to move pretty quickly.

Big question I wish Tyler had asked as a follow-on: Do you think the FDA will loosen its reins enough that Moderna and others can deal that way with individual patients without getting permission and doing large-scale tests?

The Academic Scientific Community vs. the Business Scientific Community

Look, the scientific method, the scientific community — it works on advances that are predicated on current and prior advances. Incremental advances are the coin of the realm. It’s not that they’re conservative. It’s just that the process, the communal process of accepting truth as that which can’t be negated, causes you to therefore be, in every which way, questioning everything.

I learned long ago the expression organized skepticism. That’s what science is predicated on. As a result, if you come forward with something that is not fully supported by and connected to the current reality, people don’t know what to do with it. What many academic scientists do is to spend the next 5, 10 years putting the connections in place to make what’s being proposed a natural extension of what existed before.

In industry, we don’t have that need, and the reason Moderna was able to really be the pioneer in the space of establishing a therapeutic platform, even before a vaccine platform, is because for us, the lack of connection between what we were able to do and what had been done before was marginally interesting, but we weren’t trying to publish it.

When you patent something, you don’t have to show that it’s a natural extension of what people did. You just have to describe something that is novel, that is unobvious. In fact, the less connected, the more unobvious, and/or the less connectible.

Note this sentence: “What many academic scientists do is to spend the next 5, 10 years putting the connections in place to make what’s being proposed a natural extension of what existed before.” It reminds me of the old joke about the academic who, observing that a TV works in practice, wants to understand whether it works in theory.

On Immigration and the American Dream

This next is my absolute favorite of the interview.

I also would say that as a country, there’s so many people who have the experience of coming here, that that experience can also be transmitted to people who are born here, for whom the same mindset of being willing to imagine a better . . . If you look, every single person who comes to this country imagines a better future for themselves. That’s my belief. Maybe not every single person — 99 percent.

Imagine if all of us were also born imagining a better future for ourselves. Well, we should be, but we’ve got to work to get that. An immigrant who comes here understands that they’ve got to work to get that. They have to adapt. The problem is, if you’re born here, you may not actually think that you’ve got to work to get that. You might think you’re born into it.

This will be a funny thing to say, and I apologize to anybody that I offend. If we were all Americans by choice, we’d have a better America because Americans by choice, of which I’m one, actually have a stronger commitment to whatever it takes to make America be the place I chose to be, versus not thinking about that as a core responsibility.

That brings up two memories, one old, one relatively recent.

The old memory is that when I came to this country in 1972, at age 21, I had the American dream in mind and I noticed right away that a large swath of the people I ran into in Los Angeles, whether at UCLA or in the city generally, who had grown up in the United States, didn’t.

The more-recent memory is of an interaction I had with a man who was considering running for the Republican nomination for president in 2016. I think the conversation happened in 2015, and it was at a Hoover Institution roundtable I had been invited to. I can’t name the person without violating the confidentiality rules.

He made a statement about immigrants that surprised me. He said (and I think I’m getting his words almost word for word), “So many immigrants come here and act right away as if they just arrived at home base after hitting a home run.”

When it was my turn to talk, I said, “Person X, I’m an immigrant and I thought when I got my green card I’d arrived at home base or at least at third base. I was given a list of crimes that, if I committed them, would get me booted out of the country and none of these crimes were ones I planned to commit.”

Then I made the mistake of asking about his record in a previous office he had held. He answered about his record but didn’t address my point about immigration. This man had the attitude that Afeyan attributes to many Americans: Simply by being born here, he seems to think that he’s made the rounds to home base.

I really don’t know what some politicians and some Americans expect out of us immigrants.

 

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Thoughtful Pieces on the Lessons of COVID-19

Janan Ganesh, in the Financial Times, forcefully argues that the Covid19 has “no grand lessons for the world”. The significance of the pandemic is being stretched as implying the triumph of a “system” over another, but on the basis of poor evidence. Covid19 has taken the world by surprise and it is difficult to claim that systems characterized by more civic trust, or with stronger government, or with more liberal governments, performed better than their opposites.

Writes Ganesh:

The closest thing to a pattern in this tempest of data is the scarcely believable success of east and south-east Asia. But that region encompasses communist China, the multi-party democracy of South Korea and various polities in between. What systemic lesson is the rest of the world to take from this zone of competence?

There is no disgrace in the quest for such certainty. The “narrative fallacy” is a technical term for a very human foible. It refers to our need to see shape and order in scattered events: to explain and not just record them. The alternative, which is to accept the role of randomness in life, is often too much to ask. And so an on-form sports team is assumed to have a sublime new tactic at work. Energy stocks are said to rise “on the back of” an oil-price rise, as though coincidence is unthinkable.

This urge to attribute cause and effect is all the stronger in a mortal crisis. Confronted with mass suffering, it is soothing to believe that we will emerge wiser about how best to arrange our societies. A tragedy without a corresponding agenda for reform is all the harder to bear.

Unless the data coheres into some shape, however, that is what we have. The evidence does not even throw up many hard-and-fast rules about the right policies for a virus (Taiwan, whose total death toll is seven, has had no national lockdown). Far less does it elevate one model of social organisation over others. In the geopolitical propaganda war, China will claim that its system is the one that worked this year. The liberal west will argue the same, and both will have half a point, without a clinching case.

Beyond the tautological — good government is preferable to bad government — the world has amazingly little insight to show for its year of anguish. Its challenge is to resist forcing a narrative on to facts that do not support one.

I found the piece refreshing.

Miles Kimball, instead, points out that “perfectionism made the pandemic worse”. Kimball writes that “some of the caution about evidence, accuracy, efficacy and side-effects would make sense if we were facing a lesser disease. But when people are dying all around, getting the job done is what counts, even if you get the job done by imperfect means. The way the reproduction ratio works, combining a set of several very imperfects means that pushed the reproduction ratio below the critical value of 1 could crush the spread of the coronavirus.”

In other words, “every little bit would have helped reduce the reproduction ratio of the coronavirus, but only things that were big bits were allowed”.

Consider particularly his last two points:

– Because the vaccine protocol used two doses, the vaccine-rollout plan while vaccine doses are scarce is to vaccinate half as many people with two doses rather than twice as many people with one dose, which the vaccine trials suggest has a high enough level of efficacy that vaccinating twice as many people with one dose would lower the vaccines reproduction ratio much more.

– Finally, in something that shocks me, the article at the top, “Highly Touted Monoclonal Antibody Therapies Sit Unused in Hospitals” by Sarah Toy, Joseph Walker and Melanie Evans suggests that there is a reluctance to use monoclonal antibodies because there is not yet evidence that goes far beyond what was needed to get government approval. Monoclonal antibodies work by the same principles as vaccines; the big differences are (a) vaccines get your body to make antibodies, monoclonal antibody treatment directly injects antibodies, (b) the monoclonal antibodies are chosen to be especially high-quality antibodies, while your body might or might not make a lot of high-quality antibodies after you are vaccinated, and (c) you have to vaccinate everyone, but the monoclonal antibody treatment can be given to people after they start to show some symptoms and so can be prioritized better. You can bet that I would ask for monoclonal antibody treatment if I got Covid-19.

I shall add that this attitude goes very well with the unrealistic expectation that we can and should aim for “zero risk”. This would imply that either we can reach for big enough guns enough to achieve that goal, or it is better to wait. This strikes me as unrealistic.

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The Big Lesson of 2020

The year 2020 gave us a huge amount of evidence about the relative merits of government intervention and free markets. The bottom line is that government failed massively and free markets triumphed spectacularly (with one major exception) within the constraints that government placed on them. The one apparent exception to government failure is Operation Warp Speed but, as we shall see, that apparent exception may not be an exception at all.

This is the opening paragraph of David R. Henderson, “Markets Work, Government Doesn’t,” Defining Ideas, January 7, 2021.

An excerpt:

Yet a look at the evidence as of January 4 gives little basis for the view that lockdowns reduced deaths. It’s true that the COVID-19 death rate for locked-down California, at 675 per million residents, is well below the 988 and 1,029 for, respectively, Texas and Florida, which are relatively open. But the death rates for locked-down Michigan, New York, and New Jersey, at 1,341, 1,980, and 2,180 respectively, are well above the rates for Texas and Florida. To be sure, a more careful analysis that sifts through the data and accounts for factors other than lockdown—maybe climate matters—is needed. But on their face, the data give cold comfort.

Moreover, what if a more careful analysis did show that lockdowns prevented COVID-19 deaths? That’s not a slam-dunk case for lockdowns because the costs of lockdowns are huge. They are shattering the careers and livelihoods of hundreds of thousands of restaurant workers, haircutters, gymnasium workers, and others. One might argue that the sacrifice is worth it, but isn’t it easier for vulnerable people, most of whom are old and have co-morbidities, to stay home? They would have to stay home anyway, so why insist that others who are younger and have fewer co-morbidities also stay home? Interestingly, California’s Secretary of Health and Human Services, Mark Ghaly, let the mask (pun intended) slip on December 9 when he admitted that the newly imposed ban on outdoor dining was “not a comment on the relative safety of outdoor dining.” You read that right. What, then, was his and Newsom’s purpose in putting tens of thousands of restaurant livelihoods at risk? Ghaly ’fessed up that the measure had to do “with the goal of keeping people at home.” But wouldn’t he and the other officials need to know what people prevented from dining out would do? What if a number of them instead went to other people’s houses and dined in? We were told again and again that policy decisions must be based on science, only to learn that many such decisions were made by politicians and bureaucrats who had no scientific basis for their decisions.

Another excerpt:

Consider, by contrast, the private sector. One reason that millions of people have been able to stay at home is that companies like Zoom have made our work from home possible. Note also that one reason we have Zoom is that years ago the US government allowed the founder of Zoom, Eric Yuan, to immigrate from China. If you want to count that as a success of government, you should note that the US government denied his visa applications eight times. The ninth time was the charm. And one reason we have been able to buy items when stores are closed is that Amazon has heroically stepped up to sell us items over the web and, although deliveries are slower than they were, presumably because of volume, they are still relatively quick. In case you’re worried that Yuan and Amazon pioneer Jeff Bezos are getting rich off us, they are. But our wealth from them is forty-five times their wealth from us. In 2004, Yale University economist and Nobel Prize winner William D. Nordhaus found that innovators keep for themselves approximately 2.2 percent of the value they create and that the rest goes to consumers.

Read the whole thing.

The list of government failures and market successes in the article is not nearly complete. Both areas are target-rich.

 

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890 Thousand Excess Deaths Due to Covid and Lockdowns

We find that shocks to unemployment are followed by statistically significant increases in mortality rates and declines in life expectancy. We use our results to assess the long-run effects of the COVID-19 economic recession on mortality and life expectancy. We estimate the size of the COVID-19-related unemployment to be between 2 and 5 times larger than the typical unemployment shock, depending on race/gender, resulting in a 3.0% increase in mortality rate and a 0.5% drop in life expectancy over the next 15 years for the overall American population. We also predict that the shock will disproportionately affect African-Americans and women, over a short horizon, while white men might suffer large consequences over longer horizons. These figures translate in [to] a staggering 0.89 million additional deaths over the next 15 years.

This is from Francesco Bianchi, Giada Bianchi, and Dongho Song, “The Long-Term Impact of the COVID-19 Unemployment Shock on Life Expectancy and Mortality Rates,” NBER Working Paper No. 28304, December 2020.

An excerpt:

For the overall population, the increase in the death rate following the COVID-19 pandemic implies a staggering 0.89 and 1.37 million excess deaths over the next 15 and 20 years, respectively. These numbers correspond to 0.24% and 0.37% of the projected US population at the 15- and 20-year horizons, respectively. For African- Americans, we estimate 180 thousand and 270 thousand excess deaths over the next 15 and 20 years, respectively. These numbers correspond to 0.34% and 0.49% of the projected African- American population at the 15- and 20-year horizons, respectively. For Whites, we estimate 0.82 and 1.21 million excess deaths over the next 15 and 20 years, respectively. These numbers correspond to 0.30% and 0.44% of the projected White population at the 15- and 20-year horizons, respectively. These numbers are roughly equally split between men and women.

Francesco Bianchi is an economist at Duke University, Giada Bianchi is an MD in the Division of Hematology, Department of Medicine, Brigham and Women’s Hospital Harvard Medical School, and Dongho Song is an economist at the Johns Hopkins University’s Carey Business School.

The authors write:

We interpret these results as a strong indication that policymakers should take into consideration the severe, long-run implications of such a large economic recession on people’s lives when deliberating on COVID-19 recovery and containment measures. Without any doubt, lockdowns save lives, but they also contribute to the decline in real activity that can have severe consequences on health.

I’m not sure why they are confident that there is zero doubt that lockdowns save lives. They admit in the last quoted sentence above that lockdowns “contribute to the decline in real activity that can have severe consequences on health.” What if lockdowns are responsible for half of the bad unemployment consequences, and voluntary actions in response to the fear of getting the virus are responsible for the other half? Then, assuming a linear relationship between unemployment and fatalities, the lockdowns would be responsible for half of 0.89 million to 1.37 million deaths, which translates to between 450,000 deaths and 685,000 deaths. Can they really be confident that lockdowns saved at least 450,000 lives?

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There are no non-Bayesians in a foxhole

There is some level of danger that pushes even the most stubborn government bureaucracies to start acting semi-rationally. Tyler Cowen has a brilliant new post that clearly demonstrates that the US has not reached that point.

But things are much worse in the UK, due to a new variant of Covid-19 that spreads much more rapidly. As a result, the UK has switched to the “first dose first” approach, which is very likely to save lives.  And even if it doesn’t, the approach can be reversed at a far smaller cost than if the alternative view is correct.

The UK is already beginning to make substantial progress in vaccinating old people, who are of course much more likely to die of Covid-19:

Prime Minister Boris Johnson said 23% of all over-80s in England have now been given a dose of a Covid-19 vaccine, meaning some of the most vulnerable patients are getting the protection they need.

Given the new variant of Covid, the British are engaged in a race against the clock.

If the new variant becomes widespread in America before the vaccine is distributed, the entire country could end up being hit as hard as places like New Jersey, meaning several hundred thousand extra (unnecessary) deaths.  Let’s hope our public health authorities come to their senses before its too late.

PS.  For those who like numbers, here’s the sort of decision we face:

Likelihood of one dose first being the wrong approach:  Very low, say 10%.  Cost of adopting it if it is the wrong approach:  Relatively low, say a few thousand deaths.

Likelihood of two doses first being the wrong approach:  Very high, say 90%.  Cost of adopting it if it is the wrong approach:  Relatively high, say tens or hundreds of thousands of deaths.

You do the math.

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The costs of not maximizing aggregate utility

Many people don’t like utilitarianism. They advocate alternative (often deontological) approaches to ethics. In 2020, we saw the immense costs of some of those misguided ethical systems.

Scott Aaronson has an excellent post that begins with a discussion of why he believes our response to Covid was inexcusably slow. He discusses challenge trials of vaccines, and also a WWII-style plan to build manufacturing capacity just in case the vaccines were successful.  But he also considers possible objections to his arguments, such as the fact that moving faster imposes risks:

Let me now respond to three counterarguments that would surely come up in the comments if I didn’t address them.

1.  The Argument from Actual Risk. Every time this subject arises, someone patiently explains to me that, since a vaccine gets administered to billions of healthy people, the standards for its safety and efficacy need to be even higher than they are for ordinary medicines. Of course that’s true, and it strikes me as an excellent reason not to inject people with a completely untested vaccine! All I ask is that the people who are, or could be, harmed by a faulty vaccine, be weighed on the same moral scale as the people harmed by covid itself. As an example, we know that the Phase III clinical trials were repeatedly halted for days or weeks because of a single participant developing strange symptoms—often a participant who’d received the placebo rather than the actual vaccine! That person matters. Any future vaccine recipient who might develop similar symptoms matters. But the 10,000 people who die of covid every single day we delay, along with the hundreds of millions more impoverished, kept out of school, etc., matter equally. If we threw them all onto the same utilitarian scale, would we be making the same tradeoffs that we are now? I feel like the question answers itself.

And it’s not just vaccine development; we’ve also prioritized “ethics” over saving lives in the distribution of the vaccine:

Update (Jan. 1, 2021): If you want a sense of the on-the-ground realities of administering the vaccine in the US, check out this long post by Zvi Mowshowitz. Briefly, it looks like in my post, I gave those in charge way too much benefit of the doubt (!!). The Trump administration pledged to administer 20 million vaccines by the end of 2020; instead it administered fewer than 3 million. Crucially, this is not because of any problem with manufacturing or supply, but just because of pure bureaucratic blank-facedness. Incredibly, even as the pandemic rages, most of the vaccines are sitting in storage, at severe risk of spoiling … and officials’ primary concern is not to administer the precious doses, but just to make sure no one gets a dose “out of turn.” In contrast to Israel, where they’re now administering vaccines 24/7, including on Shabbat, with the goal being to get through the entire population as quickly as possible, in the US they’re moving at a snail’s pace and took off for the holidays. In Wisconsin, a pharmacist intentionally spoiled hundreds of doses; in West Virginia, they mistakenly gave antibody treatments instead of vaccines. There are no longer any terms to understand what’s happening other than those of black comedy.

Everyone is entitled to choose their own preferred ethical system as a guide to their daily life.  But there is only one reliable ethical system to be used in public policy—maximizing aggregate utility.  As soon as you ignore that goal, you end up killing lots of people for no good reason.

In retrospect, none of this should have been a surprise (although I admit to being caught off guard.)  I had assumed that our disgraceful policy of banning kidney markets was a one-off exception.  Now I see that the same instinct that leads to tens of thousands of excess deaths of people with kidneys disease also pervades our entire public health system.

Aaronson understands that this failure goes well beyond one individual or even one country; it’s a broader failure of society:

Furthermore, I could easily believe that there’s no one agent—neither Pfizer nor BioNTech nor Moderna, neither the CDC nor FDA nor other health or regulatory agencies, neither Bill Gates nor Moncef Slaoui—who could’ve unilaterally sped things up very much. If one of them tried, they would’ve simply been ostracized by the other parts of the system, and they probably all understood that. It might have taken a whole different civilization, with different attitudes about utility and risk.

At the same time, I do believe that utilitarianism is gradually gaining ground.  But there’s still much more work to be done.

HT:  Matt Yglesias

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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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Adding Demand to Increase Excess Demand

Possible 11th Pillar of Economic Wisdom: When you’re in a hole, stop digging.

One of the most absurd things that have happened with the Pfizer COVID-19 vaccine is that politicians have been trying to increase demand for a vaccine of which, not surprisingly at a zero price, there is a shortage.

The rationale for putting Nancy Pelosi, Mitch McConnell, Mike Pence, and Karen Pence at the front of the line way ahead of almost all of the rest of us is that it will persuade people that it’s safe and those otherwise-hesitant people will be more willing to take it. They might be more willing to take it, but if that’s the rationale, the rationale makes zero sense in December. Tens of millions of us are ready to take it now. There’s no need to persuade people to take it when there isn’t enough in the short term to satisfy all willing takers.

Hmmm. Do you think there might be another reason for Pelosi, McConnell, and Pence to take it now? Let’s scratch our heads really hard and we might come up with a reason.

Here it is. They’re selfish people who are using their privileged position to get immunized. This is Newsom French Laundry all over again.

This “patriotic” behavior on their part is the opposite of admirable.

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The FDA’s Deadly Caution

The earliest Moderna probably would have sold the mRNA-1273 vaccine would have been after it began scaling up manufacturing. A company doesn’t begin manufacturing until it believes in a product. In the timeline above, that’s March 23. But manufacturing takes some time to get going. Let’s assume that by April 1, five weeks from the date the first batch was shipped, Moderna begins offering mRNA-1273 for sale.

Sales start slowly. Supplies are limited. Only the bold and brave get inoculated. The rest of us, and Moderna, get some early, albeit messy, safety and efficacy data. This data helps Moderna improve the vaccine, dose, and dosing schedule. Having a ready market and a steady source of revenue, Moderna scales up production faster than in the timeline above.

In this scenario, inoculations could have begun at least 8.5 months earlier and, perhaps, the pandemic would have ended 240 days and 240,000 lives earlier. There’s little talk of lockdowns and the economy remains resilient.

This is from Charles L. Hooper and David R. Henderson, “The FDA’s Deadly Caution,” AIER, December 16, 2020. In it, we consider various scenarios for what would have happened had we had a truly free market in pharmaceuticals.

The one above is the most optimistic.

Read the whole thing.

 

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