A December 28 report in the Wall Street Journal illustrates (again) how a wish for free enterprise in America is not like carrying coals to Newcastle (see Charles Passy, “New York to Penalize Health-Care Providers $1 Million for Covid-19 Vaccine Fraud“). For Mr. Cuomo, who drinks at the zeitgeist of our times, “fraud” simply means what the government does not like. A few excerpts:
New York Gov. Andrew Cuomo said Monday he will sign an executive order to penalize health-care providers that administer the Covid-19 vaccine without following state prioritization protocols. … Mr. Cuomo, a Democrat, said that providers that ignore this will face fines of up to $1 million and a revocation of all state licenses. …
State Health Commissioner Dr. Howard Zucker said over the weekend that ParCare was being investigated by the state police for possibly obtaining the vaccine fraudulently and then transferring it to other parts of the state and administering it to the public without paying heed to the prioritization rules. …
Mr. Cuomo said he wasn’t surprised that issues are already arising with health-care providers potentially violating state mandates with vaccine prioritization.
“You’re going to see more and more of this. The vaccine is a valuable commodity,” he said.
The first two paragraphs cannot but remind us of the old USSR government, the mother of all persecut0rs of those who don’t respect “state prioritazition protocols.” Why shouldn’t groceries, say, be allowed to ignore “state prioritazition protocols” on food allocation? But fascism may be a more relevant reference than communism since the former allowed more tightly-controlled private businesses than the latter, as Lawrence Dennis argued.
The last two paragraphs remind us that, indeed, any commodity that many people consider valuable and which the state tries to control is going soon be the object of smuggling—what statocrats call “fraud”—for the benefit of individuals who want it and are willing to pay for it.
Should vaccines first go to cops or to teachers? To the old or to the young? There is no way for a government planner to make an efficient decision on this if only because there are some among individual teachers and some among the old who would be willing to sacrifice more to be vaccinated than other members of the groups to which the state arbitrarily identifies them. What if Google wants to buy vaccines for all its employees? What if a charitable organization wants to purchase some for its poor clientèle? As my co-blogger Scott Sumner just argued, the price mechanism is more efficient and even more just (if we want to jump in the undecided philosophical debates that have been raging for 25 centuries) than decisions made by politicians and bureaucrats.
Moreover, if the available vaccines were sold to the highest bidders (like beef, cars, or shoes) noting would (or, in the current emergency, should) prohibit the government from bidding in the same market, but without prohibiting others to do the same. The market exclusion that the governor of New York advocates seems alas natural to most people. It always strikes me how inclusion-obsessed activists work to exclude so many people.
The current situation is economically inefficient, morally questionable if not absurd, and dangerous for social peace. The federal government distributes the vaccines to the state governments, with all the vagaries of state distribution systems. State governments then add another layer, albeit variable, of inefficiency and authoritarianism by deciding who among their citizens will get the vaccine and who will, in the best case, have to wait their turn. (See Dan Frosch, Elizabeth Findell, and Peter Loftus, “As Covid-19 Vaccins Roll Out, States to Determine Who Gets Shots First,” December 9, 2020.)
Yet, isn’t an emergency situation like a pandemic different? A long (classical) liberal tradition from Adam Smith to Friedrich Hayek or Milton Friedman would answer yes. But—and here lies the big difference—liberals would not forbid free markets and voluntary cooperation to coexist with justifiable government intervention. A free market will insure, through the profit motive, that more vaccines are available, while not banning the free expression of individual preferences according to different personal circumstances. As I just argued, the government could bid against its own citizens, as when it buys anything (including labor services) on the market, but without prohibiting them from outbidding it.
Classical liberals and many more radical libertarians share a common ideal: the presumption of liberty, which can only be overcome when restrictions are necessary to protect liberty itself, or something to that effect. In a major crisis (and Covid-19 is probably one), such restrictions may be warranted if they don’t seriously undermine liberty—for now or for the future. This being said, there is room for disagreement in the liberal-libertarian tent. (In a Café Hayek post of yesterday, Don Boudreaux articulates a libertarian position on the conditions of the presumption of liberty.)
Everybody in the tent must wish that economic freedom and free enterprise will not continue to be so tightly shackled in 2021.
READER COMMENTS
Warren Platts
Dec 31 2020 at 1:17pm
A couple of points:
(1) The vaccine is largely a government creation in the first place in the sense that the government (Trump’s Operation Warp Speed) subsidized the development.
(2) The companies seem to be pumping out the vaccine as fast as they possibly can. But perhaps the problem is the licensing. Maybe the government should just buy out the licenses from Moderna & Pfizer and let any company on the Planet manufacture the vaccine.
(3) When you got a monopoly on something, it is to your advantage to NOT produce as much of the product as you can. The optimal quantity supplied profit-wise will be less than the amount you can possibly produce. Just ask Saudi Arabia.
(4) The vaccine is not like toilet paper. Even if the market were “unleashed” more than it already is, people for the most part would not be paying out of pocket for the vaccine. The distribution would be mediated through insurance companies, Medicare/Medicade, VA, etc. What that entails, I don’t know.
(5a) Shouldn’t we “follow the science” and do what the epidemiology experts say to do? That is, the overall societal good should be to end the pandemic as quickly as possible with as few excess deaths as possible. One theory is the most vulnerable should get the vaccine first; the tradeoff is they are not the ones spreading the disease for the most part.
(5b) Thus, there could be an epidemiological argument for turning the vaccine loose on the free market. People buying it first would probably tend to be those people who engage in the risky behavior of living their lives normally. This could arguably get the R0 down to less than 1 sooner than the current system. That could be a winning argument even if the number of doses is the same under either scenario.
Craig
Dec 31 2020 at 2:19pm
Cogent points all.
But this is about survival and I don’t care where the state’s caste system dictates my place in the queue.
Warren Platts
Dec 31 2020 at 3:00pm
If you want to go first, be my guest! 😉
Jon Murphy
Dec 31 2020 at 2:35pm
To your point 1: just because something is subsidized doesn’t imply that it is “largely a creation” of the subsidy. For example, the Pfizer vaccine was developed without government funding.
To your point 2: Too bad there isn’t some vast empirical literature that could help us consider how to encourage production.
To your point 3: Eh, not quite. It’s unclear what you mean by “as much of the product as you can.” No producer, whether a monopoly or in a perfectly competitive market, will ever produce “as much product as they can” if that means the far end of the supply curve. It is true that a monopolist will produce less than a competitive market (which makes your argument in favor of the Jones Act odd since there you’ve claimed that a monopoly increases production relative to a free market), but that’s not quite the same as saying that a monopolist doesn’t produce all they can. Be more specific on what you mean by that phrase.
To your point 4: true that insurance would cover the cost for some people, but irrelevant.
To your point 5a: Roger Koppl’s 2018 book “Expert Failure” on why “follow the science” is an empty phrase and why “doing what the experts say” has lead to the very issues. Likewise, I have a forthcoming paper on this topic with Roger and other coauthors, not to mention several others on the pandemic itself.
Warren Platts
Dec 31 2020 at 3:08pm
https://edition.cnn.com/2020/12/11/business/pfizer-vaccine-covid-moderna-revenue/index.html
Jon Murphy
Dec 31 2020 at 3:26pm
Ok? Not sure why you think that’s relevant.
Craig
Dec 31 2020 at 4:49pm
Pfizer also did take money from the Bundesregierung.
Jon Murphy
Dec 31 2020 at 5:07pm
And? Just like for the US, that was for manufacturing, not development. Again, it’s not obvious why Platts or you think that it is relevant.
Craig
Dec 31 2020 at 5:56pm
Because there are contracts here.
Craig
Dec 31 2020 at 6:04pm
And Moderna it was for development and manufacturing and frankly even that doesn’t matter. Bottom line the government physically BOUGHT the doses.
Jon Murphy
Dec 31 2020 at 9:05pm
True. Irrelevant. The claim was that the government created the vaccine. It participated the process but did not create. And was not even that instrumental in the creation. And, as we have seen, has hindered manufacturing and distribution.
Jon Murphy
Jan 1 2021 at 10:58am
Just to finish the thought on the “creation” assertion:
Claiming that the government “largely created” the vaccine because the government subsidized some companies’ development is the Obama “you didn’t build that” fallacy. Simply because some agent participates in a process doesn’t imply he is therefore responsible for the project. The creation of the vaccine is the result of the research done by the companies. The funding may have enabled the development of the vaccine (though, as even Mr. Platts admits, the biggest help came from removing barriers in place rather than the subsidies themselves), but the funding did not create the vaccine.
By way of simile, giving government credit for creating the vaccine would be like giving the local coffee company credit for my research simply because they sell me the coffee that gives me energy to write.
Warren Platts
Jan 2 2021 at 6:14pm
What is irrelevant are pedantic discussions of the semantics of the word “creation”. The point is that the government has a legitimate claim to the first batches of these vaccines. In the case of Pfizer that you bring up, it turns out that the federal government literally owns the first 100 million doses–all paid for, lock, stock, and barrel.
Jon Murphy
Jan 2 2021 at 7:18pm
Firstly, I don’t think your first assertion is merely pedantic. As I, and others in other places, have discussed, whether or not the vaccine would exist absent government funding is important. Using a proper model to understand the world is key. Using improper models lead to improper conclusions. (As an aside, this is why I like the UCLA-Chicago line of Economic reasoning and mathematical modeling. Mathematics force us to be very precise in our thinking. When one reads the great Chicago greats, like Stigler and Becker, you see the mathematics they use are to sharpen their thinking. The mathematics help them think through their theories as opposed to being theories themselves the way Samuelson tends to be. Armen Alchian is the same way).
Secondly, of you want to argue the government has a claim on the vaccine because it paid for them, that’s fine (also the claim to a vaccine is irrelevant to your assertion #1). But so what? As Pierre (and others) have written, there’s nothing wrong with the government owning doses and doing as they please with them. The issue is when only the government has the right to own the vaccine and chooses how its distributed (or, as is the case now, how it is not distributed).
In your assertion #3, you talk about the issues of monopoly. So, one wonders why you are unconcerned with monopoly I’m the vaccine.
Pierre Lemieux
Jan 1 2021 at 12:41am
Good answers, Jon.
Pierre Lemieux
Jan 1 2021 at 12:58am
@Warren: I think that your only argument that is consistent with economics (or, perhaps, that, ideologically, is not typically fascist or socialist) is the monopoly argument (although, on second thought, it is reconciliable with socialism). The problem is that if the rights of inventors to their creations were not protected as other forms of property—although the extension of “intellectual property” has no doubt gone much too far), there would be no inventors or no more of them than in Russia or Africa. This is admittedly a serious problem that you raise. But don’t forget a monopoly of governments (politicians and bureaucrats) on how to organize the economy is certainly more harmful than a limited monopoly, alienable on the market, on a particular product by a particular inventor.
Pierre Lemieux
Jan 1 2021 at 1:05am
@Warren: There is the story of the Russian official who asked British economist Paul Seabright: “Who is in charge of the supply of bread to the population of London?”
Warren Platts
Jan 2 2021 at 6:36pm
Who exactly is in charge of vaccine distribution? Is it government planners and bureaucrats, as you say? Or is it scientists and experts in epidemiology? I suggest we be careful about playing the “the experts are idiots that need not be taken seriously” game. After all, you claim to be an expert in economics, and that, therefore, what you have to say on economics is something that should be taken seriously.
Thus, the argument that Google (of all monopolies) ought to have the right inoculate its employees first if they’re willing to pony up enough cash is not persuasive in the slightest. In fact, it is nauseating.
On the other hand, there actually is a discussion among the epidemiologists as to what is the best strategy: (1) focus on the most vulnerable first; or (2) focus on the superspreaders first. If an economist could demonstrate that a free market approach would in fact deliver the best public health outcome: in this case, I guess, ending this pandemic as fast as possible with as few deaths as possible, then that would be persuasive.
Finally, if the rollout is not going as fast as we nonexperts on the sidelines think it should, perhaps the problem is neither a supply issue nor a distribution issue. It could be a demand issue. I just saw this morning that 50% of frontline health workers in California are refusing to take the vaccine, even though it is being offered to them now, free of charge.
Jon Murphy
Jan 4 2021 at 9:20am
Yes. It’s the central planners. State governors have the final say, and as we have seen in New York, they are just as happy to let vaccines go to waste if it doesn’t meet their “plan.”
Jon Murphy
Jan 4 2021 at 9:34am
That’s really a false dichotomy. It’s saying ” is it central planners [deciding] or is it central planners?” Experts face the same problems of central planning as politicians (see Koppl 2018, 2020a, 2020b, 2020c primarily, but Ikeda 1997, Lavoie 2016, Murphy Forthcoming, Coyne 2013, Easterly 2014, and Smith 1776 all discuss the same issues).
Warren Platts
Jan 5 2021 at 2:44am
Epidemiology expert insists we must do A.
Economics expert insists we must do B.
As a disinterested, concerned citizen, I’m going with the epidemiologist until the economists can demonstrate that B will generate a better health outcome. (That is, we are not talking about toilet paper, generators, and bottled water this time.) It is perhaps likely such a case could be made, but all I’m seeing is handwaving so far.
Also, name-dropping is not an argument.
Jon Murphy
Jan 5 2021 at 9:48am
Right, but that’s the very problem. Which experts matter in a pandemic? (For what its worth, John Ioannidis, who has published in immunology, epidemiology, and economics, sides with the economists). Surely, you learned economics in your Chicago econ class and thus know epidemiology is an economic issue (if you need a refresher, read your Wealth of Nations or I, Pencil).
Secondly, the choice isn’t as stark as you present. Epidemiologists are not unified on A. Some say A. Some say B. Some say C. Others say D. How do you, a concerned citizen, choose among the competing experts?
Thirdly, as a scientist you surely know how much of science is normative. Predictions are model-dependent and models are assumption-dependent. The judgement of experts plays into what models they use and subsequently what opinions they give. So, how do experts decide?
True. I am just citing the relevant literature. That is an argument.
Pierre Lemieux
Jan 5 2021 at 11:37pm
Yes. “Public health” experts are the central planner: most of them work for governments in influential positions.
Jon Murphy
Dec 31 2020 at 1:43pm
Not to mention resources spent on preventing the “fraud.”
Craig
Dec 31 2020 at 2:16pm
Indeed, I believe Cuomo has decreed million dollar fines and loss of licensure for medical professionals engaged in such activity.
Pierre Lemieux
Jan 1 2021 at 12:41am
It appears that governments did not just “buy the vaccines” and try Soviet-Union methods of distributing it, but that it forbids private health care facilities or other intermediaries (or individuals, for that matter) from buying the vaccines themselves and selling them at the price that the market will bear. If that were not the case, you would already see thousands of pharmacies offering it. Cuomo has seen this.
Thomas Hutcheson
Dec 31 2020 at 6:11pm
If the company accepted the vaccine on the condition that it follow a “protocol” then not following it is indeed fraud. Whether the protocol itself is wise or not does not make the firm’s action less fraudulent. How can we reform a bad rule if we can’t count on it being followed?
David S
Jan 5 2021 at 5:21am
Market Solution: everyone should move to Hawaii:
https://www.cdc.gov/nchs/nvss/vsrr/covid19/excess_deaths.htm#dashboard
Compare Hawaii to every other state. In every other state I examined, there is an obvious trend that you can easily identify as the virus. In Hawaii, there is no trend – there are also no obvious excess deaths. So either COVID doesn’t cause excess deaths in Hawaii, or the excess deaths in Hawaii are exactly counteracted by the preventative measures taken. And of course these preventative measures have had no such effect anywhere but Hawaii.
Also of interest: Deaths while having COVID are 1.08 per thousand in the US, and 0.20 per thousand in Hawaii. So if (as seems most likely) the actual deaths from COVID alone are essentially zero in Hawaii, it would appear that 80% of the recorded deaths while having COVID are in fact deaths from having COVID.
https://www.google.com/search?client=firefox-b-1-d&q=covid+19+usa+deaths
https://health.hawaii.gov/coronavirusdisease2019/
Jon Murphy
Jan 5 2021 at 10:58am
Third explanation: Hawaii is a small island in the middle of the ocean with relatively little travel, and thus relatively little exposure to the virus. The preventative measures are unrelated to its success.
Comments are closed.