Michael Kremer: evaluation

Transcript context

…Is there something you would nominate that’s specific? Solar-powered space stations, a trip to Mars, or what do you want to do? Well, look, I would love to have, say, a malaria vaccine. I think it would be a great example. Let me give you another example. I’m going to give examples that are from the world of development economics, but I completely agree with you — this could be used in many other settings as well. A lot of people in developing countries cook with a small fire in their house, and that creates incredible indoor air pollution. That’s estimated to kill millions of people a year. It also produces not just carbon emissions, but some chemicals that are actually much worse for global warming than that per unit volume. There have been efforts to develop cleaner stoves. Now, those haven’t gone that far, in part because they haven’t found something that consumers want to use. That’s actually a great case for an advance market commitment because part of the idea of an advance market commitment is, you have to meet certain technological thresholds, but you also need to get customers willing to put up something. We could say that if somebody produced a cleaner stove and if consumers were willing to pay $10 for it, then there could be an additional $20 or $30 worth of subsidy, for example. Details would have to be thought out, but that would be another example. Sure, we could have things to reduce recidivism rates. We could have programs to address educational challenges. There’s a whole host of areas in high-income countries or in the United States where there are technological challenges that, for whatever reason, are not attracting quite the level of effort that tech companies are putting into other fields, and if we want more innovation, we could promise to reward them. If you think the market risk premium is off for very large investments for biomedical research, do you think the same is true for smaller investments? That is, what are the micro-foundations of what goes wrong with the market risk premium and biomedical investment? Does it plague all venture capital firms for biomedical ideas, or just the big stuff because it’s a liquidity issue? So for vaccines, we need advance market commitment, but for ordinary investments, venture capital will work just fine? What’s your view?…

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