What Should Government Do About Possible Pandemics?


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A new coronavirus similar to the one that sparked the SARS panic ten years ago is rumbling across the world. As Reuters reports:

A nurse in a hospital that held France's only confirmed case of the SARS-like coronavirus that has killed 18 people has been admitted to hospital in northern France on suspicion on being infected herself, French health officials said on Friday.

The World Health Organisation (WHO) raised the number of cases confirmed worldwide to 33 after Saudi Arabia said that two people who were admitted to hospital there in April had been determined by laboratory analysis to be infected.

There is no evidence so far of sustained human-to-human transmission of the coronavirus. But health experts are concerned about clusters of new possible cases of nCoV, which started in the Gulf and spread to France, Britain and Germany.

Earlier this week, George Mason University economist Tyler Cowen proposed in his New York Times column that governments should provide big grants to innovators to develop medicines and vaccines when a plausible deadly new communicable disease threat emerges. As Cowen writes:

Our current health care policies are not optimal for dealing with pandemics. The central problem is that these policies neglect what economists call "public goods": items and services that benefit many people and can't easily be withheld from those who don't pay for them directly.

Protection against communicable diseases is a core example of a public good, as is basic scientific research, which can yield new ideas that may be spread at very low additional cost. (In contrast, Medicare, which is publicly financed, has some elements of a public good, but any particular expenditure tends to benefit an individual receiving treatment, rather than being spread over a number of beneficiaries.)

One obvious step forward would be to exempt biomedical research from cuts of the current federal budget sequestration. Research and development grants are a way to pay potential innovators up front — an important move, as an innovator can't always charge high-enough prices for the value of its remedies when they're actually needed.

If a pandemic became a major issue in the United States, demand for remedies would surge far beyond the level associated with a typical seasonal flu outbreak, and permitting high prices would be unpopular — and perhaps unfair. The threat of contagion also makes it crucial to spread the net of protection as widely as possible, which again suggests low prices.

Yet it is crucial to have some reward system in place for medical innovators. Well in advance of a pandemic, research needs to be done, and vaccine capacity and drug distribution facilities need to be built up. In the H.I.V./AIDS crisis, for instance, the United States was caught flat-footed — and an appropriate response has taken decades, in part because we were not prepared. Without government financing for such public goods, the capacity wouldn't be there if a new pandemic produced a surge in demand. This would amount to an institutional failure.

The government could also take another, more unusual step: it could promise to pay lucrative prices for the patents on drugs and vaccines that prove useful in dealing with pandemics. The point of buying the patent is to distribute the remedy, if needed, as widely and as cheaply as possible. If the pandemic never occurs, the reward wouldn't have to be paid. But the very promise of such a reward might induce suppliers to take the risk of increasing capacity in advance….

OVER all, the American government seems to be turning its back on its traditional role of producing and investing in national public goods. If there is any consistent tendency in recent government spending, it is that spending on entitlements like Social Security and Medicare — which provide mostly private benefits — is rising and that investment and spending on national public goods is falling.

As a budget category, "government consumption and gross investment" is a proxy for many kinds of public goods spending. As a share of gross domestic product, it has fallen to less than 19 percent, from a peak of 24 percent in the 1980s, with no expected reversal in sight. Yet total government spending is expected to increase because of income transfers and entitlements. Neither political party seems able to halt that logic or even cares to make an issue of it.

Focusing government on the production of public goods may sound like a trivial issue, too obvious to be worth a mention. But, in fact, we have been failing at it, and the consequences could be serious indeed.

The whole Cowen article is well worth your attention.

For more background see my column, "Disease, Public Health and Liberty," in which I point out that the spread of communicable microbes is a case of the tragedy of the commons and conclude:

Until somehow we can all be held responsible for our own microbes, managing the medical commons by sometimes coercive means will be necessary.

That means quarantine or spending, as Cowen suggests, taxpayer dollars on public goods.

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  1. So basically a letter of marque and reprisal aimed at a disease? 😉

  2. What Should Government Do About Possible Pandemics?

    If the “Obesity Pandemic” is any example, not one damn thing. The government’s McGovern Commission pretty-much started it, but the government thinks it should be part of the solution?

    1. I’m sensing that you have a thing for diets.

      1. Just a little, huh?

        Because of my father’s heart problems I followed the government’s diet and exercise recommendations until at age 40 I was twice the weight I was in college. By then I was on a 1200 calorie low-fat diet and exercising 2 hours a day and still gaining. They were even checking me for brain tumors.

        Then nine years ago I “supported” a coworker who was going on a high-fat/low-carb diet. What the hell… I committed to two weeks. I dropped more than a third of my bodyweight in 8 months eating whenever I was hungry. And I have kept it off. All done exactly the way the government says it cannot be done.

        1. Nice work. Just watch out for Warty, you’re kinda stealing his schtick.

          1. No proob. Warty and I have talked here before. I’ve just been busy and had a long posting gap.

            I was the one who offered “White Indian” the free use of some wild land up in BC, if she really wanted to “gambol” and live off the fat of the land. There are plenty of fish, rabbit, deer, bear, and all sorts of game birds. Of course, you have to know how to hunt them, dress them, cook them. Oh, and things like some bears’ livers have poisonous levels of vitamin A.

            She should have taken my up on it. She would have been bored to tears, being used to the ‘burbs of Fort Worth.

    2. I fucking hate how the word “epidemic” is used for everything these days. The only public health things that the government should have anything to do with are serious contagious diseases.

      1. I fucking hate how the word “epidemic” is used for everything these days.

        Yep. Propaganda runs on buzzwords.

        The only public health things that the government should have anything to do with are serious contagious diseases.

        Sorry, not sure I can even concede that.

        1. Perhaps I should add “assuming that the government should have anything to do with public health at all”.

          I’m a bit of an anarchist in principle, so when I discuss government, I always assume that it will be involved in lots of different things, since that’s just what governments do. SO assuming that there is going to be a government that gets involved in things like health, controlling serious diseases is at least something that will probably do a lot more good than harm. And I’m thinking of responses to serious outbreaks, not monitoring every little thing.

          1. I get you. But whenever I find a story carefully detailing some great wonder that only the government could do, it usually turns out they either drove out the competition by grant of monopoly, or else the real story is they decided to jump on the bandwagon with someone who was already working toward the solution anyway.

            Sometime read up on the power production methods farmers were using before the Rural Electrification Act. A lot of the monopoly powers they handed out have stayed in place to the present. Many years ago when I worked out how to generate the power I needed for a home, I went to the county to work out the licensing requirements. The man there was sympathetic, but asked me if I realized that if I generated my own electricity that I would have to meter it so I could pay the power company for it too. Under California law at the time, the utility owned all electricity generated in its territory. What I planned was classified as theft.

      2. The epidemic epidemic is a serious problem.

  3. Our current health care policies are not optimal for dealing with pandemics.

    Our language is not optimal for dealing with the epidemic of the overuse of “pandemic” and “epidemic”. 33 cases in a world of 7.5 billion people should not warrant this much concern.

    1. I read that and thought “who cares”? It’s killed 0.00000044% of the world population? Plus, it’s not even transmissible by human-to-human contact? Why are we worried about it?

    1. “This is a quarantine area. Stop or we shoot the dog! . . . Wait, are those donuts? . . . Okay, walk this way with the donuts up.”

  4. “What Should Government Do About Possible Pandemics?”

    Kill everyone, it’s the only way to be sure.

  5. Maybe it wasn’t such a good idea to have public health officials start worrying about bullshit personal choice issued like smoking, guns and such and stop worrying about you know public health issues like sanitation, public cleanliness and disease spread?

    Thanks to the public health professionals, you can’t buy a 32 ounce soda in New York but you do have a good chance of having bedbugs in your hotel room or you apartment. Thank you leftist assholes for taking over and co-opting another profession.

      1. Thanks Ron.

    1. Solid rant.

  6. Well, there’s cleansing flame.

  7. Research and development grants are a way to pay potential innovators up front ? an important move, as an innovator can’t always charge high-enough prices for the value of its remedies when they’re actually needed.

    Here’s a thought, when a big new pandemic-potential disease is discovered and someone makes a cure for it then the cure should be given to everyone for free. What kind of heartless bastard needs to make a profit from saving the lives of millions (potentially)? The good of mankind should always trump greed. What are these companies going to do, withhold their medications and just watch everyone die? How would that even help their desire to make money? You can’t make money from dead people.

    1. So medical research facilities should be funded like charities to cover their costs?

      1. Funded? We’re talking about the future of mankind here. If they’re not serious about helping then they should go into another business.

      2. Medical research facilities should be funded like the companies that do the medical research – privately. I don’t see what the problem is here. If there’s a truly species-threatening disease out there and someone develops a cure, they’re going to get money from it one way or the other. Are you telling me that people are so irrational that they wouldn’t pay $100 or $1000 or even $10000 to save their lives from something that will definitely kill them? Have we gotten to that level of entitlement mentality? Personally, if I had to go bankrupt to finance the preservation of my own life, I would do it. Nothing could be more valuable to me. To think otherwise is to conflate money and wealth.

    2. yes, but what do you do when the companies capable of conducting research at that scale go out of business because they spent $10 billion developing a new drug and then give it away for free in the face of an epidemic. All of a sudden when the next pandemic comes along there is no one available to develop the vaccine.

      1. What are they spending $10 billion on?

  8. “What Should Government Do About Possible Pandemics?”


    1. Starting with itself.

  9. I think it’s reasonable for the government to allocate resources to fight infectious disease that crosses state lines. We should, of course, amend the constitution first.

  10. permitting high prices would be unpopular ? and perhaps unfair.

    I’m left completely mindfucked by that statement.

  11. Tyler Cowen mentions cancer drugs that can be extremely expensive. But they’re so expensive because the market for them is so tiny. Vaccines for common diseases, by contrast, should sell like hotcakes, so they can sell for much less.

    I don’t like the idea of gov’t owning patents and treating them in the usual way a patent holder would treat one. So the law should be that if the US gov’t buys a patent, the patent should come off it immediately.

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