Michael Kremer: prediction

Transcript context

…Final question. When it comes to advance market commitment, what is the very next thing you will be doing? I’m doing a lot of work on the problem of COVID. Some of this work is with people who are involved in the pneumococcus advance market commitment — Chris Snyder, Jin Lee, others. But we’re also working with some other industrial organization economists, for example, Susan Athey. When we think about this problem, the problem of getting a COVID vaccine is different in some important ways. That’s, again, something that economics and being close to research, in theory, will tell you. Just to be clear — sometimes people have a stereotype of experimentation as opposed to theory. I think they’re strongest when they’re linked. There’s a number of different things we’ve suggested, but one of them is — and this is very much with your colleague, Alex Tabarrok — very simply is, the world economy is losing $500 billion every month due to COVID, and that means that it’s worth investing a lot in trying to develop a COVID vaccine, even though there’s a pretty high risk of failure, and it’s also worth getting lots of shots on goal. Now, for a variety of reasons, which I could go into, the private returns from building out a very large factory for a vaccine before we know whether the vaccine is going to work — before testing is complete — are much less than the social returns. In this particular case, it probably makes sense for governments to offer to cover — you probably want a mix of push incentives and pull incentives. Some reward for success, but also just some up-front financing for building those factories ahead of time. That’s what we’ve been arguing for, and a bunch of countries are doing things like that — so, the US Operation Warp Speed — but many other countries are putting in orders for vaccine even ahead of the time the vaccine’s been proven to work. There’s obviously risk involved, but it’s very much a risk worth taking. There are other lessons that are coming out of the industrial organization of this, like it’s very important to invest in supply-chain capacity, not just in the production of the ultimate vaccine. We might want to consider ways to get some of the early information from the trials out, so we can use it even before the trial is finished. We can use it to invest optimally in manufacturing. So a lot of insights from studying the economics of this, and that’s obviously a critically important problem. And policymakers seem . . . Again, you could say it’s a glass half full or half empty. I would say the glass is at least partially full. I’d like policymakers to be investing more in this, but they are starting to invest, and they’re starting to do these contracts well in advance of availability of the vaccine. Michael Kremer, thank you very much.…

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