Category: Economics

On Vaccines and Economics, Europe Suffers “the Same Bureaucratic and Intellectual Rigidity”

(p. A25) Europe’s vaccination debacle will almost surely end up causing thousands of unnecessary deaths. And the thing is, the continent’s policy bungles don’t look like isolated instances, a few bad decisions made by a few bad leaders. Instead, the failures seem to reflect fundamental flaws in the continent’s institutions and attitudes — including the same bureaucratic and intellectual rigidity that made the euro crisis a decade ago far worse than it should have been.

The details of the European failure are complex. But the common thread seems to be that European officials were not just risk averse, but averse to the wrong risks. They seemed deeply worried about the possibility that they might end up paying drug companies too much, or discover that they had laid out money for vaccines that either proved ineffective or turned out to have dangerous side effects.

So they minimized these risks by delaying the procurement process, haggling over prices and refusing to grant liability waivers. They seemed far less worried about the risk that many Europeans might get sick or die because the vaccine rollout was too slow.

For the full commentary, see:

Paul Krugman. “A Fiasco That’s Very European: Vaccines.” The New York Times (Friday, March 19, 2021): A25.

(Note: the online version of the commentary has the date March 18, 2021, and has the title “Vaccines: A Very European Disaster.”)

Cafe Hayek Quotes from Openness Book on Happiness

Posted by Arthur Diamond on Friday, April 2, 2021

Don Boudreaux quotes from my Openness to Creative Destruction book on Cafe Hayek, the blog he runs with Russ Roberts.

My book is:

Diamond, Arthur M., Jr. Openness to Creative Destruction: Sustaining Innovative Dynamism. New York: Oxford University Press, 2019.

In the Early Fight Against COVID-19 in China “Front-Line Bureaucrats Were Consumed With Paperwork”

(p. A15) After Chinese leader Xi Jinping ordered rural poverty eliminated by 2020, bureaucrats in the southwestern city of Mianyang got busy—with paperwork.

Instructed to devote 70% of their time to the campaign, they diligently filled out forms certifying compliance, a practice known as “leaving marks,” said Pang Jia, a local judicial clerk who joined the effort. When higher-ups demanded photographic proof of their home visits, some aid workers made up for missing winter photos by posing in cold-weather clothing during summer house calls, Ms. Pang said.

Since taking power in late 2012, Mr. Xi has realigned Chinese politics with his domineering style and a top-down drive to forge a centralized state under the Communist Party. But his efforts are running into an old foe: bureaucracy.

Party observers say the drive for centralization in a sprawling nation too often fosters bureaucratic inertia, duplicity and other(p. A10)unproductive practices that are aimed at satisfying Beijing and protecting careers but threaten to undermine Mr. Xi’s goals.

Indeed, some local officials have become so focused on pleasing Mr. Xi and fulfilling party mandates that they can neglect their basic duties as public servants, sometimes with dire results.

As the new coronavirus spread in Wuhan in late 2019, for instance, local authorities were afraid to share bad news with Beijing. That impeded the national response and contributed to the death toll, according to a Wall Street Journal investigation.

Mr. Xi and other senior officials publicly lamented how front-line bureaucrats were consumed with paperwork instead of fighting the contagion. Officials dedicated hours each day to filling out multiple documents for agencies making overlapping requests for information, including residents’ body temperatures and symptoms.

For the full story, see:

Chun Han Wong. “Xi Jinping’s Eager Minions Snarl His China Plans.” The Wall Street Journal (Monday, March 8, 2021): A15.

(Note: the online version of the story has the date March 7, 2021, and has the title “Xi Jinping’s Eager-to-Please Bureaucrats Snarl His China Plans.”)

Long Beach Supermarket Workers Lose Jobs Due to Higher Minimum Wage

(p. A15) As these things always do, it started out with the best intentions. In January [2021] the City Council of Long Beach, Calif., adopted an ordinance requiring large grocery-store chains to pay employees an extra $4 an hour. The idea was to reward them for the risks they took by doing their jobs amid the Covid-19 pandemic.

It didn’t turn out that way. In response to the ordinance, Kroger Co. announced it would close two Long Beach supermarkets.

. . .

As one of the world’s largest retailers, Kroger makes an easy villain. But instead of blaming “reckless capitalism,” might the fault lie with the reckless politicians who passed this measure? Thanks to their intervention, instead of finding an extra $4 an hour in their paychecks, nearly 200 grocery workers will now have no paychecks at all unless they are transferred to another store or find another job. It’s but the latest illustration of economist Thomas Sowell’s dictum that whatever a government might set it at, “the real minimum wage is always zero.”

For the full commentary, see:

William McGurn. “The Human Cost of a Minimum Wage.” The Wall Street Journal (Tuesday, February 16, 2021): A15.

(Note: ellipsis, and bracketed year, added.)

(Note: the online version of the commentary has the date February 15, 2021, and has the same title as the print version.)

Bernie Sanders Is Uncomfortable that Twitter Censored Trump

Do you think there is truth to the critique that liberals have become too censorious and too willing to use their cultural and corporate and political power to censor or suppress ideas and products that offend them?

Look, you have a former president in Trump, who was a racist, a sexist, a xenophobe, a pathological liar, an authoritarian, somebody who doesn’t believe in the rule of law. This is a bad-news guy. But if you’re asking me, do I feel particularly comfortable that the then-president of the United States could not express his views on Twitter? I don’t feel comfortable about that.

Now, I don’t know what the answer is. Do you want hate speech and conspiracy theories traveling all over this country? No. Do you want the internet to be used for authoritarian purposes and an insurrection, if you like? No, you don’t. So how do you balance that? I don’t know, but it is an issue that we have got to be thinking about. Because yesterday it was Donald Trump who was banned, and tomorrow, it could be somebody else who has a very different point of view.

I don’t like giving that much power to a handful of high-tech people. But the devil is obviously in the details, and it’s something we’re going to have to think long and hard on.

For the whole interview, see:

Klein, Ezra, interviewer. “An Unusually Optimistic Conversation With Bernie Sanders; The Vermont senator discusses the Rescue Act, cancel culture, the filibuster and more.” The Ezra Klein Show, on the New York Times web site. (Tuesday, March 23rd, 2021).

(Note: the first sentence question is by interviewer Ezra Klein. The following answer is by Senator Bernie Sanders.)

Vaccine Immunity, Plus Natural Immunity from Getting Covid-19, Equals Herd Immunity Soon

The author of the passages I quote below is a surgeon and professor at the Johns Hopkins School of Medicine and has authored The Price We Pay, which I recently read. It is a disturbing, eye-opening, excellent account of why the costs of drugs are high and rising.

(p. A17) Anthony Fauci has been saying that the country needs to vaccinate 70% to 85% of the population to reach herd immunity from Covid-19. But he inexplicably ignores natural immunity. If you account for previous infections, herd immunity is likely close at hand.

. . .

Dr. Fauci’s vaccination-only path to herd immunity has significantly influenced the national conversation. KNBC-TV in Los Angeles has a county-by-county vaccine tracker showing a bar graph of the percentage of Californians vaccinated, with the zone 70% to 85% labeled “herd immunity.” Currently, it’s at 26%. The false construct does create a greater urgency for everyone to get vaccinated. But it also creates false justification for continued excessive restrictions on freedom. And it raises the possibility that authorities are misallocating the limited vaccine supply by failing to direct it toward people without natural antibodies.

. . .

Some experts claim they don’t talk about natural immunity because we shouldn’t trust it. But a recent Public Health England study found that less than 1% of 6,614 healthcare workers who had Covid-19 developed a reinfection within five months—even though many of them work with Covid patients. Other experts believe natural immunity is powerful. “Natural immunity after Covid-19 infection is likely lifelong, extrapolating from data on other coronaviruses that cause severe illness, SARS and MERS,” says Monica Gandhi, an infectious-disease physician and professor at the University of California.

For the full commentary, see:

Marty Makary. “Herd Immunity Is Near, Despite Fauci’s Denial.” The Wall Street Journal (Thursday, March 25, 2021): A17.

(Note: ellipses added.)

(Note: the online version of the commentary has the date March 24, 2021, and has the same title as the print version.)

The Makary book praised above is:

Makary, Marty. The Price We Pay: What Broke American Health Care–and How to Fix It. New York: Bloomsbury Publishing, 2019.

U.S. Media Covid-19 Stories More Negative than World Media Stories and than Scientific Journal Stories

(p. A8) Bruce Sacerdote, an economics professor at Dartmouth College, noticed something last year about the Covid-19 television coverage that he was watching on CNN and PBS. It almost always seemed negative, regardless of what was he seeing in the data or hearing from scientists he knew.

When Covid cases were rising in the U.S., the news coverage emphasized the increase. When cases were falling, the coverage instead focused on those places where cases were rising. And when vaccine research began showing positive results, the coverage downplayed it, as far as Sacerdote could tell.

But he was not sure whether his perception was correct. To check, he began working with two other researchers, building a database of Covid coverage from every major network, CNN, Fox News, Politico, The New York Times and hundreds of other sources, in the U.S. and overseas. The researchers then analyzed it with a social-science technique that classifies language as positive, neutral or negative.

The results showed that Sacerdote’s instinct had been right — and not just because the pandemic has been mostly a grim story.

The coverage by U.S. publications with a national audience has been much more negative than coverage by any other source that the researchers analyzed, including scientific journals, major international publications and regional U.S. media. “The most well-read U.S. media are outliers in terms of their negativity,” Molly Cook, a co-author of the study, told me.

About 87 percent of Covid coverage in national U.S. media last year was negative. The share was 51 percent in international media, 53 percent in U.S. regional media and 64 percent in scientific journals.

For the full commentary, see:

David Leonhardt. “The Pandemic Is a Grim Story, but is Bad news the Only Kind?” The New York Times (Wednesday, March 24, 2021): A8.

(Note: the online version of the commentary has the same date as the print version, and has the title “Bad News Bias.”)

The study discussed above is:

Sacerdote, Bruce, Ranjan Sehgal, and Molly Cook. “Why Is All Covid-19 News Bad News?” National Bureau of Economic Research, NBER Working Paper #28110, Nov. 2020.

Raising Minimum Wage to $15 Will Likely Cause 16% Rise in Low-Skilled Job Loss

(p. A15) A recent Congressional Budget Office report estimated that 1.4 million jobs would be lost if a new $15 federal minimum wage is signed into law. Advocates were quick to dismiss the CBO’s conclusion. “It is not a stretch to say that a new consensus has emerged among economists that minimum wage increases have raised wages without substantial job loss,” said Heidi Shierholz of the Economic Policy Institute, which has also circulated a letter signed by economics Nobel laureates and others making the same claim.

. . .

To provide an accurate reading of the research, Peter Shirley and I surveyed the authors of nearly all U.S. studies estimating the effects of minimum wages on employment published in the past 30 years. We asked them to report to us their best estimate of the employment effect, measured as the “elasticity,” or the percent change in employment for each 1% change in the minimum wage. Most authors responded, and in the few cases in which they did not, we pulled this estimate from their study.

The results are stark. Across all studies, 79% report that minimum wages reduced employment. In 46% of studies the negative effect was statistically significant. In contrast, only 21% of studies found small positive effects of minimum wages on employment, and in only a minuscule percentage (4%) was the evidence statistically significant. A simplistic but useful calculation shows that the odds of nearly 80% of studies finding negative employment effects if the true effect is zero is less than one in a million.

Across all the studies, the average employment elasticity is about minus-0.15, which means, for example, that a 10% increase in the minimum wage reduces employment of the low-skilled by 1.5%. Extrapolating this to a $15 minimum wage, this 107% increase in the states where the federal minimum wage of $7.25 now prevails would imply a 16% decline in low-skilled employment (broadly consistent with the recent CBO study). That sounds like a substantial job loss.

For the full commentary, see:

David Neumark. “Raising the Minimum Wage Definitely Costs Jobs.” The Wall Street Journal (Friday, March 19, 2021): A15.

(Note: ellipsis added.)

(Note: the online version of the commentary has the date March 18, 2021, and has the title “Raising the Minimum Wage Will Definitely Cost Jobs.”)

Rebates to Formulary Middlemen Are a Growing Part of Drug Costs

(p. B14) To actually sell medication, a drugmaker needs to persuade public and private health plans to place their product on the plan’s formulary, which is a list of drugs the plan is willing to purchase. That means paying middlemen rebates and discounts to choose their drug over any other rival treatments. Failure to secure favorable formulary access could mean low sales even for a highly-effective and safe medication..

. . .

“To secure that formulary position costs us more and more every year,” said Adam Gluck, Sanofi’s head of U.S. corporate affairs, in an interview. The company says that the average list price for its insulin products is up 141% since 2012 but that the net price is down 53% over that same period.

It isn’t just Sanofi facing this dynamic. Merck & Co. said last month that its average U.S. sticker price rose 3.1% in 2020 even as its average net price fell slightly. That is a sea change from recent years: In both 2015 and 2016 Merck’s average list price rose by about 10% while the net price realized by the drug giant rose by 5.5%. Nearly half of Merck’s gross sales went out the door to third parties as discounts last year. A decade ago, that tally was around 27%. Other drugmakers like Bristol-Myers Squibb report similarly high spreads between gross and net sales.

For the full commentary, see:

Charley Grant. “Pharma Giants Are Getting Their Pennies Pinched.” The Wall Street Journal (Saturday, March 13, 2021): B14.

(Note: ellipsis added.)

(Note: the online version of the commentary was updated March 12, 2021, and has the title “Pharma Giants Get Their Pennies Pinched on Drug Pricing.”)

Video of Diamond Q&A on Innovation Unbound Posted to YouTube

On 3/17/21 Derek Yonai posted my 3/16/21 live Q&A session related to my “Innovation Unbound” lecture that was recorded on 3/1/21 and posted on 3/9/21. Some of my lecture and some of my answers in the Q&A, were related to my book:

Diamond, Arthur M., Jr. Openness to Creative Destruction: Sustaining Innovative Dynamism. New York: Oxford University Press, 2019.

Quiet, Modest Steinsberger Said Scientists Should “Be Interested in Learning About Nature,” Not in Seeking Prizes

(p. B12) Jack Steinberger, who shared the 1988 Nobel Prize in Physics for expanding understanding of the ghostly neutrino, a staggeringly ubiquitous subatomic particle, died on Saturday [Dec. 12, 2020] at his home in Geneva.

. . .

In 1988, The Economist said Dr. Steinberger “enjoys a reputation as one of the finest experimental physicists in the world.” The magazine continued, “In a field full of flamboyance and a fair bit of arrogance, he is a quiet, modest man; something of a physicist’s physicist.”

As if to prove the point, Dr. Steinberger told a meeting of Nobel laureates in 2008 that scientists should “be interested in learning about nature,” not prizes.

“The pretension that some of us are better than others,” he said, “I don’t think is a very good thing.”

For the full obituary, see:

Douglas Martin. “Jack Steinberger, Physicist Awarded a Joint Nobel Prize, Is Dead at 99.” The New York Times (Thursday, December 17, 2020): B12.

(Note: ellipses, and bracketed date, added.)

(Note: the online version of the obituary was updated Jan. 20, 2021, and has the title “Jack Steinberger, Nobel Winner in Physics, Dies at 99.”)