Maybe it is the confidence of dead old white men imprinting on me as I start my first week at Oxford, but let me write about something I don’t actually know too much about (macroeconomics and I have a complicated relationship, okay?); inventions.
Although we are still in the middle of a pandemic, some people seem to think that the solution - a vaccine - is just around the corner. While I have no idea what goes into the process of developing a vaccine (science, I guess) I have been thinking about what happens if/when we have a vaccine; who will get it when and at what price?
In economics-speak, the vaccine is a good for which there is high demand and I am asking questions about the supply. Standard economic theory suggests that producers provide goods at a price in order to make profits. How much profit, and what price the good sells for depends on the specific market. You can’t sell apples at $10 apiece because there will be an apple merchant just around the corner who will sell her apples at a lower price. Because there are many people selling many apples, apples are usually cheap. When it comes to a vaccine for the coronavirus, however, just one person (/entity) will be selling a good that everybody wants. In "monopoly-world", that person (read: pharmaceutical company) could sell the vaccine at a high price and make a ton of money, but only very few people - those who can afford it - will be able to buy the good. In a better world, the vaccine would be publicly available to everyone at no cost. But is that possible?
Going back to basic economics, producers will only make their goods if they can at least recover the costs that went into the production of the good. Clearly, inventing a new vaccine requires a lot of (wo)manpower (labour) as well as technological equipment and other biology stuff which we shall call capital. So, a combination of labour and capital will give us our vaccine. But who will pay for the scientists’ wages and all the fancy lab equipment? Option number one has a company, let’s call them “Bayyer” (a made-up name, not based on any real-life exploitative persons or group), pay for all the inputs (capital and labour) and reap the benefits from the output (the vaccine). Bayyer only cares about their profits so they will just make enough of the vaccine to get rich, regardless of how many people might want or need it. If you care about people not dying, you’d clearly prefer an alternative option. This option sees the government using our taxes to fund research and development.
But which government?
When a person invents something she will patent her invention, which means that only she can produce that specific good. For example, if Bayyer invented a vaccine (or paid the inventor) they would own the product and could sell it at any price. If a government wanted to provide a good for free to everyone, it would run into the free-rider problem. (Here, let me make the assumption that everything a country needs in order to provide the vaccine is the knowledge of how to produce it. Clearly, in reality, some countries may not have the available technology or resources to do this.) So, speaking of the vaccine only in terms of knowledge, it is a public good. A public good is something that is available to everyone (non-excludable) and one person’s consumption of it doesn’t diminish the next person’s consumption (non-rival). The free-rider problem then is this: If country A is willing to spend money to develop a vaccine that will be available to everyone (globally), then why should countries B to Z spend their own money? Countries A to Z reap the benefits, but only A pays. That’s the conundrum right now. It takes a lot of money to develop the vaccine but if we want everyone to have it we need to find a way to collaborate.
Importantly, that is the conundrum from an (undergrad) economic perspective. Everything I said was over-simplified, and I am sure there are some forms of international or regional collaboration, but my point is this: standard economic theory limits the way we can think about problems and their solutions. Underlying the free-rider problem, and other “problems” (trAGedY oF tHe CoMmONs) with public goods and resources in economics is the assumption that people are selfish assholes. That might be the case for Adam Smith who counts the self-interest of the “the butcher, the brewer, or the baker” to provide his dinner and not his mum’s who is the person actually cooking the dinner (unpaid labour much), but -newsflash- people don’t only care about themselves. Professors at universities who have been researching coronaviruses for ages (shoutout to my boy Drosten <3 ) do this because they like research and like helping people. Not everyone is only in it for the money.
In the end, I don’t know the who, the when, or the what of the supply of a vaccine. Neither am I an expert on economics (yet 😉). I do hope that economics will move away from assumptions that ultimately limit the way we can think about production, invention, public goods, and collaboration, and instead use its fancy tools and modeling techniques to try and do some (public) good.
----Hilarious side note: As I decided to write this post I did some googling on global public goods and found this article from the ODI. One of the first sentences is: “The concept of global public goods achieved prominence with the UNDP publication Global Public Goods (Kaul et al, 1999)”. Apparently, us Kaul’s are just naturally interested in public goods.