By Kristalina Georgieva As G20 leaders meet virtually this week, the global economy faces a critical juncture. Countries have started to climb back from the depths of the COVID-19 crisis. But the resurgence in infections in many economies shows just how difficult and uncertain this ascent will be. The good news is the significant progress […]
In the US, more than 800 people a day die of Covid-19, and the curve is beginning to trend upward again. Clearly there would be a substantial benefit from having a vaccine, just in terms of lives saved. In addition, Covid-19 imposes an enormous cost on the economy, especially sectors such as travel and entertainment.
Many pundits have suggested that “challenge studies” would speed up vaccine development. In the past, when I’ve advocated this approach some have argued that it wouldn’t make much difference. But a recent article suggests that vaccine development is indeed being slowed by a lack of infections:
On Tuesday, front-runner Pfizer revealed in an earnings call that the first interim analysis in its Phase 3 clinical trial has not yet occurred. That means there hadn’t yet been enough Covid infections among the trial participants to take a first stab at analyzing whether the people randomly assigned to receive vaccine were infected at a lower rate than people who were assigned to get a placebo injection.
So the Pfizer vaccine is being held up by a lack of infections, something that could be addressed with challenge studies. Some medical ethicists oppose the idea.
A vaccine is not the only possible way to get our economy back on track; an effective treatment for Covid would also make people more willing to go out engage in economic activities. Another article in the same journal suggests that policy mistakes also played a role in slowing the availability of treatments. Here Scott Gottlieb discusses the shortage of monoclonal antibodies, a highly promising new set of drugs:
“It is deeply unfortunate that we head into fall without enough doses of this drug,” Scott Gottlieb, the former commissioner of the Food and Drug Administration, tweeted after Regeneron released its news. “Many of us were talking about this as early as March. Regeneron did extraordinary work to secure their own manufacturing, but we needed a concerted industrial effort to get the supply we needed.”
Indeed, Gottlieb penned op-eds in the spring and summer calling for a government-backed effort to manufacture the antibodies in large volumes — akin to the massive effort to develop experimental, and still unproven, Covid-19 vaccines. He reiterated that action needs to be taken now to accumulate sufficient supply to treat high-risk patients.
In the spring, I criticized the program that gave $1200 to almost all middle class families, even those with jobs. Some people argued that budget deficits are almost costless at near-zero interest rates. But even in the unlikely event that interest rates stay at zero forever, any given government program has an opportunity cost—the money could have been spent elsewhere. If these funds had instead been used to fund a crash program in drug manufacturing, we’d likely be much closer to a solution to the Covid recession.
[Sure you can argue, “do everything”. But politicians are not willing to spend unlimited amounts of money, nor should they.]
In mainstream economic textbooks, there are actually relatively few industries where there is a strong theoretical argument for government intervention. Most of those cases involve some sort of “externality” or “public good”. And yet we see real world governments spend literally trillions of dollars on programs where there is little theoretical justification, and still fail to fund the one area where there seems to be a very strong “public good” argument. Based on what I’ve read, this problem is even worse in many other countries, including places like Italy, where the government spends over 50% of GDP and yet provides substandard services in many areas.
I worry when I hear pundits suggest that government spending is not costly in a world of near-zero interest rates. That’s a recipe for waste, and for misallocation of resources.
PS. The benefits from solving the Covid-19 problem goes beyond lives saved and an improved economy, there is also evidence that the disease causes brain damage:
Researchers at the Baylor College of Medicine reviewed 84 studies involving more than 600 patients who had been diagnosed with COVID-19. The median age was 61, and two-thirds of the patients were men, while one-third were women. The study’s authors examined the results of patients’ electroencephalograms — known as EEGs, the tests detect abnormalities in brain waves, according to Johns Hopkins Medicine — and found that brain abnormalities in COVID-19 patients were “common.”
HT: Tyler Cowen