Economics The universal governments' failure to employ market forces as a tool to expedite the rollout of Covid-19 vaccines is costing millions of lives and trillions of dollars. When your apartment block is on fire isn't the time to discuss equity and fairness, and yet, that is exactly what has happened since the pandemic took hold early in 2020. In governments' haste to be seen as virtuous and principled, they have collectively taken their eye off the ball. The ball is the $10trn cost in forgone GDP over 2020-21 compared with the 20bln cost governments are expected to spend on Covid-19 vaccines over the same period. To put it another way, the cost of vaccines is only 0.2% of the loss to GDP. What is needed is for us to visualise the true value of a vaccine. (This is not the same as the market value as I describe in an earlier post 'Competition Stifles Growth'.) The true value is the price that we are willing to pay for it. How much are you willing to pay for a Covid-19 vaccination?
Vaccines mean different things to different people. For me, a vaccine is not only about a safer road to the future but also freedom. Let's put it like this; I would be willing to spend more on getting fully vaccinated than a holiday to some distant exotic destination. Many, if they have the money available through savings or credit, would be prepared to spend a lot more. This gives us a clear idea of the demand side of the equation. We are now getting a better picture of the true value of a vaccine and it turns out that it's thousands of times more than what governments are expected to spend. No wonder the rollout is so slow. If you are not truly convinced by this argument, allow me to suggest a strategy to expedite vaccine rollout taking into account the actual demand, or the true value. Simply put, governments offer a licence to pharmaceutical companies to sell vaccines at true value once they have administered a quarter of world requirements in vaccines for free. That would probably do the trick, but just to ensure that the pharmaceutical companies neither take the world hostage nor wipe out their profits through aggressively competing with each other, I would suggest the following. After the administration of the free vaccines to high priority groups and the poor, the 2nd tranch of vaccines is offered to the richest 1% at the price of $10,000 for someone to get fully vaccinated. The next tranch, a few weeks later, is for the next 10% of the wealthiest at $1000 per person. The remaining 64% of the population only pay $100. The overall income to the pharmaceutical companies will be nearly $2trn, (a lot less than the expected $10trn hit to the world economy) however, as there are a limited number of arms to be vaccinated, it'll be the first movers who take the major share of this revenue. As there are such huge profits to be made, the pharmaceutical industry will be able to attract all the investment from shareholders they need, and because the stakes are so high, the pressure these shareholders put on the companies will ensure rapid manufacture and early delivery/administration. Can you remember the pictures of the bicycle graveyards in China. What we have just done is recreated the same economic climate for that to occur. If everyone could be so kind as to share the Facebook link to this post, then perhaps I won't have to wait 3 years to receive my first jab down in Rio, and you won't have to worry so much about some new variant that sets us back to square one, or even worse :(
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AuthorHi, I'm Christopher Taylor, and I mainly write about things that aren't what they seem. Forthcoming Issues IS MODERN MONETARY THEORY WISHFUL THINKING? TAX NEGATIVE EXTERNALITIES, NOT WORK WHY PROPERTIES ARE SO EXPENSIVE WHY HEALTHCARE IN THE US IS SO EXPENSIVE WHY SOMALI PIRATES ARE PAID SUCH LARGE RANSOMS DISCOUNT CLUB FAVOURING GOODS PRODUCED IN DEMOCRATIC NATIONS THE SUBDUING OF CHILDREN MUST STOP THE PEOPLES PROTEST BOT GERMANY'S SILENT CURRENCY MANIPULATION MONEY (THE LACK OF) IS NO REASON THERE IS ALWAYS A SIMPLE SOLUTION... WHICH DOESN'T WORK THE TICTOK-GENERATION MESSAGE TO PUTIN HOW COMMERCIAL BANKS LEND AN EU LEADERSHIP DEFICIT DUMPING ON AFRICA TO PAY PUTIN |