Michael Kremer: belief

Transcript context

…If you could subsidize only the buyers, you could have vaccine vouchers. Let the production side take care of itself and capture the externality that way. But presumably, there’s something wrong with the generation mechanism. It turns out there’s a whole host of distortions here. We do subsidize vaccines. Governments do a lot of the purchasing, but then there’s a commitment problem, at least in some countries. Governments aren’t necessarily going to pay the full social value of the vaccine. They may pay less than that. If that’s the case, then firms might not be adequately incentivized. They may be incentivized, but maybe not adequately incentivized to produce the good. If we think about something like malaria, for example, there are many different governments involved, for example, many small African countries. No one of those countries has an incentive to say, “Well, let’s pay a price that would generate the socially appropriate incentives for developing a malaria vaccine.” So there’s a global public-good problem there in addition to everything else. There’s quite a few distortions in vaccine markets. In general, however, we don’t think that innovators capture that much of the value. It’s a fairly small fraction. People who’ve estimated the social rate of return to private investment and R&D often estimate numbers like 70 percent. I don’t think it’s limited to vaccines — that might be an extreme case. But I would actually be in favor of trying to boost R&D incentives in a wide variety of fields, not just some of the ones that we’ve mentioned so far. I’ve seen estimates — they’re actually from one of the groups you founded — that a deworming pill could cost as little as 50 cents a year per person in many parts of Africa. So why isn’t deworming done much more?…

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