Intro. [Recording date: January 26th, 2021.]
Russ Roberts: Today is January 26th, 2021 and my guest is John Cochrane of Stanford University's Hoover Institution. This is John's sixth appearance on EconTalk. He was last here in September of 2016 talking about economic growth and changing the policy debate.
I want to thank listeners who voted in our survey of your favorite episodes of 2020. That survey is now closed, results coming soon.
John, welcome back to EconTalk.
John Cochrane: It's a pleasure to be back. Anytime, Russ.
Russ Roberts: Our topic for today is vaccines and other issues surrounding the pandemic that are related to pricing, and supply and demand. You bravely argue that we should have taken and should in the future take a more free-market approach. Let's start with testing for the virus and what went wrong there and why we should have done something different.
John Cochrane: Great. And, I want to clarify, I'm not a doctrinaire only to free market. What we saw was a horrendous failure of our public bureaucracies. These are cases that Econ 101 textbooks tell you there's externalities--market failures, a wise government should fix things. But, our wise governments did a terrible job. So, the market is very much a second best--'the worst of all possible systems, except for all of the others,' as the saying goes.
And, what I actually argue for is markets at least on top of government. Let some freedom reign. The government both does what it does, but it also forbids the rest of us from doing other things. And, I think that's the real damage.
So, generalities aside, let us remember what a cacophony testing was and remains under the government control.
Tests were developed very quickly. The Center for Disease Control [CDC], however, not only bungled its own test, refused to let us use tests that had been developed elsewhere, even made it illegal for universities who know how to make tests and conduct them to conduct their own tests, putting the whole testing thing a month or two behind schedule; and the chance of handling this with competent public health--testing, tracing, isolating--then evaporated.
The FDA [Food and Drug Administration] continues to regulate tests, taking a long time to improve them. The most recent--imagine how this would have gone if you could have a little paper script test that you can take at home, costs two to five bucks, you can find out if you're sick; your employer can use this to find out if you're sick, send you home; you know who's got it, you know who doesn't.
Why don't we have that? Because the FDA refused to approve it, continues to refuse to approve it. The one that has finally after close to a year into this, let out of the barn, it does so still requiring a doctor's prescription, $50 bucks, and enrolling into an app.
Now by what possible right, you may ask, does the FDA not allow you to know what's going on inside your body and not allow a company to sell you that service? A test can not hurt you.
We can talk about medicines and vaccines--those maybe could go wrong--but a test cannot hurt you unless you take this extraordinarily paternalistic view that you might do something bad with the information that you get with the test, which is in fact the kind of view that they take.
So, how would things work in the free market? Now, free market would not be perfect. People have a tendency--we've seen people who get tests go out anyway. People might not want to pay the $2 to $5 bucks. There's an externality--if you get tested, you need to do something unpleasant: stay home.
But, suppose we could have all had whatever tests we wanted. Maybe they were imperfect, maybe not. We would know what they're--they're better than taking a thermometer and a web check of your systems, which is the testing we use now. We're allowed to use medieval technology. We're just not allowed to use modern technology, in order to test, to isolate and trace.
So, allowing the market to develop tests, send them to us, even if imperfect would have been a lot better, even on top of--eventually the government would say this test is certified and so forth.
And, I want to close with, there's a deep problem of bureaucratic mindset. The FDA is stuck in thalidomide, briefly brought out of it by the AIDS crisis. It's thinking of the test as--
Russ Roberts: Explain what that is. John, explain what you mean by thalidomide.
John Cochrane: Thalidomide was a great disaster of a drug in early 1960s, when a drug turned out to cause birth defects; and the FDA had approved it.
So, the FDA, when it thinks 'certify a test,' it thinks you're in a hospital you're sick, really sick. The doctor needs a test to know how to treat you. That test really has to be accurate and it doesn't matter if it's expensive.
The point of the test for us is to stop the spread of the disease. There's two very different philosophies of tests here. And, for that you need cheap, you need quick. Getting a test that takes three days to come back or two weeks to come back is pointless. You need cheap, you need quick, you don't need totally accurate. In stopping a disease, we just need to get the reproduction rate below 1. So, if 1 in 10 people has a false positive or false negative and goes out, that's fine: You've caught the other nine and the disease stops.
So, there's this bigger problem of a bureaucratic mentality that both the CDC and FDA have not been able to get around: we're facing exponential growth, we need to stop the spread of a disease, not certify things for use in an individual treatment setting.
I think that's a lot behind it. But, market would have served us a lot better.
Russ Roberts: And, do you think--I think a lot of the appeal of an inexpensive test, you summarized it with, I think, 'Test, trace, isolate.' I don't sense a lot of political will among a large chunk of the population for isolate.
If you go to Australia--if you're allowed to go, which is quite difficult--but if you go to Australia, they put you in a hotel for two weeks. You have to pay for it, by the way, and your food. And, you're not allowed to leave the hotel room. You don't have a dog with you, so you can't pretend you have a dog to walk. The fine for leaving the room is $20,000.
Now Australia has done pretty good at keeping the disease under control. Those strictures--which apply to Australian citizens mostly, by the way, returning home not to tourists--that wouldn't be so popular in the United States.
Do you think that--if we don't think isolate and trace, which is another thing Americans don't like so much, some Americans--do you think that the testing would have made a relatively important difference? And, do you think it would the next time given our, I think, unease and dislike of trace and isolate?
John Cochrane: Yeah. Thanks for bringing that up.
The key is a bad habit in contemporary policy discussions of sentences with no subject. 'Test, trace and isolate'--who does the isolating?
Now 'test, trace and isolate' is the command-and-control gold standard when you have a very bad disease that is just beginning to break out. So, if you've got Ebola or smallpox breaking out in a small area, you just descend doctors and public health people on it. You force people to get tested. You force the contact tracing; and you stamp this thing out.
I think it's pretty clear now that test, trace and isolate was never going to work for the United States given how quickly this transmits, given the asymptomatic transmission. So, that would have been nice. It certainly would have been nice to start it--at least, how about testing everybody who comes in on an airplane? That's an idea we're only a year into this beginning to start doing.
But, I think what certainly would have helped is access to testing. Again, test, trace and isolate is what you do to put out the final embers of a very dangerous disease. We needed to slow down the spread.
And, the one thing you have to get to mind about these disease is how nonlinear it is. If each person that gets it gives it to two people, you have exponential, out-of-control growth. If each person who gets it gives it to 0.8 people, the thing dies out on its own. Each person who gets it does not have to give it to zero people-first thing you need to understand. And, second is: this thing is mostly spread by super-spreaders. Almost all of the people who get COVID give it to nobody else. And, then a couple of people, or a couple events, a couple of circumstances give it to 20 or 30 other people.
So, we don't really need the test, trace, isolate where the implicit verb is the government. If we had had access to testing, people's own voluntary isolation and their non-governmental association isolation.
So, Stanford, if it had--right now, you have to get a test once a week if you want to set foot on Stanford's campus. Stanford would, of course, if we had paper-strip testing, would have said once a day. A bar, a restaurant, businesses, airlines, schools, all sorts of private organizations, or even government organizations would have happily said, 'You to set foot on here, you need to have a current test.' And, recommend you self-isolate. And if only half of them do it, well, you've cut the reproduction rate in half.
So, access to testing and voluntary use of it would have stopped this thing in its tracks without the need for the kind of thing we do when there's Ebola and smallpox.
Throughout this, the perfect has been the enemy of the best, many times. Our governor--our beloved governor in California--just allowed outdoor dining again. Well, you know, where's the science on how many of these things were spread by outdoor dining? Originally, they closed the parks. Now, I don't think there has been a single documented case of anybody getting COVID from casually passing by somebody else on a hiking trail in California. That is the kind of activity that has a reproduction rate of 0.00001. So, it was ridiculous to try to stop that.
And that breeds public resentment against all the other things. I was listening to the news conference--a hilarious list of the 57 different rules, which vary county by county. I don't think anybody knows even what the rules are, let alone paying attention to them.
So, yes, a voluntary use of tests and access to tests, I think, would have done enormous good. I think Paul Romer, who you interviewed, makes a case: we would not have had a summer wave and not had had this fall wave.
Remember, a vaccine is just a technology for stopping the spread of the disease. Testing is a technology for stopping the spread of the disease. People voluntarily want to do a lot of testing--maybe not perfectly, maybe not calibrate all the externalities the way our friends in Cambridge would if they only had their hands on the wheels. But it would have done enough to get the reproduction rate under 1, and we wouldn't be here right now.
Russ Roberts: So, let's turn to vaccines. One of the great triumphs, I think, of scientific progress, an entirely new technique for generating a vaccine was--I think it took two days, the lab time--back in--when you say it was 'back in January,' everyone assumes you mean this month. No, it was a year ago: January of 2020. This is, in a way, one of the most heartbreaking aspects. There are a number of aspects of this that break my heart, but this is one of them. So, 2020--12 months, a little over a year from when we're making this recording, and about 400,000 deaths ago--
John Cochrane: In the United States--
Russ Roberts: In the United States, excuse me--a vaccine was created. That it turned out was incredibly safe and appears to be quite effective. Of course, it wasn't known in January of 2020 that that was the case.
But, what that set into motion was a formal testing process with the Food and Drug Administration, the FDA, that has culminated in the marketing right now of, I think, two vaccines in the United States--Pfizer, Moderna. I think AstraZeneca, which is being used a great deal in the UK [United Kingdom]--I'm not sure it's legal yet in the United States.
And so, what went wrong there? Of course, on one level it was a tremendous success: a mere 11 months from development to approval--which, tragically, I think is probably a record of incredible amount of speed. But, it could have been better. How?
John Cochrane: It's an emergency use approval. It's not actual approval. That takes decades.
So, let's start this by celebrating the triumph of science and remembering that much of our wealth comes from science, not stimulus.
Russ Roberts: Yeah. That's a good line.
John Cochrane: And, this one in particular--the development of the mRNA [messenger RiboNucleic Acid] vaccines, it came just in time. These things didn't exist a year or two ago. In fact, it was a kind of science that was very disparaged. I remember reading that they couldn't get funding for it because it was kind of so lowly on the scientific ladder of things.
And, it came out of the failure to find an AIDS vaccine. So, it's not all good news. But that they learned so much about how not to make an AIDS vaccine that they had this thing January 21st of 2020. Before the WHO [World Health Organization] even admitted that we had a pandemic in hand, there was the vaccine, developed in one weekend.
And, let's be optimistic: after the current snafus are all over, there is a possibility that we look forward to the day when every infectious disease can have a vaccine developed in a weekend.
And, hopefully the FDA or who is in charge of the FDA will have learned the lesson; and that mRNA vaccines after the first three or four can be regarded as so successful--so sure--that they don't need extended Phase 1, 2, and 3 Clinical trials.
And, by the way the flu vaccine--so the flu vaccine is changed every year; and they don't do clinical trials on every variant of the flu vaccine. They just kind of know that this process is okay and safe.
So, there's the possibility that our children could face a world where--there will be more pandemics. They will be far worse. This was the fire drill. This was--relative to historical pandemics, the death rate from this one is very small. But, we could live in a world where vaccines are developed over a weekend and then rolled out the next week--putting a stop to one of the great tragedies.
Okay. Now, enough for cheering science--let's say 'Boo' to bureaucracy.
So, um, yes: The gold standard is the clinical trial. For ethical reasons, they decided that they would not allow challenge trials. People would volunteer.
Russ Roberts: Explain what that is.
John Cochrane: You could--so here's your problem. You develop a vaccine, you've got to give it to some people in a control group who pretend, get the vaccine and then go out; and then you just have to wait to let nature see how many get it.
Now, the problem is most people are still being careful. And, most of the people you give the vaccine to don't get exposed to the vaccine[virus?--Econlib Ed.]. So, I'm going to make up numbers here, but let's say you give it to a 1000 vaccine people, a thousand controlled people, only 20 or 30 of the people who you've given the vaccine to are actually exposed to the disease. So, now you have to see very small numbers. It takes a long time to figure it out.
So, why don't we--if volunteers are willing to take the vaccine--you know, young, healthy people--and then go out and deliberately expose themselves so you get better numbers, well, you could learn a lot more quickly.
It's a complex ethical question. But, the FDA said 'No.' We went through the full phase I, phase II, safety, efficacy, and so forth. And, then yes--only under an emergency use authorization this would never have made it even the year that it took.
Now vaccines are hard because sometimes they don't work; and people think--and again people think they're healthy and they're immune and they're not, and vaccines can harm people.
So, how would a freer market have taken this?
Well, certainly after the first stage when you know it's safe, there is a libertarian case for let people try things that we don't know if it's safe or not safe; but we don't have to go that far. You know very quickly in Phase One whether this thing is safe. Then: Can people be allowed to take it when we still don't know exactly the efficacy?
Well, had that happened--had we essentially enrolled the whole country in a clinical trial, anybody who wants it, we would have found out the safety and efficacy of this thing very quickly. And, we wouldn't be here. We might've had a first wave, but we wouldn't have had a second wave.
The FDA took a long time. It even took an extra week or two. Apparently, once it had the data, why did it--it's been watching the data all along--why wasn't it saying they're ready with the rubber stamp? 'Yes, go.' Well, they took some extra time for public relations to make it look like they were really thinking hard about this so people would have--this got politicized. A lot of people said, 'No, it's a Trump vaccine so we can't trust that it's going to be safe.'
And, there's still AstraZeneca--is legal in the United Kingdom, certified in the United Kingdom. It's better in a way because it doesn't require deep freezing, but there were some snafus involved with the U.S. clinical trials; and so even though it's legal in the United Kingdom, the U.S. FDA is not allowing it for use here.
So, they're going to have to go do a whole new set of clinical trials. And, maybe once the cow is fully out of the barn--horse--sorry, that's the wrong metaphor. Once the milk is truly spilled, the horse is truly out of the barn. They'll allow that to be sold in the United States. It's very cheap, room temperature storage. They could just mail it to you and you could take it.
And, again, this is--part of it is, you'll see this--we'll talk in a minute about the rationing scheme. But, they're thinking about a vaccine to protect an individual and is it safe to protect an individual from sort of an act-of-God disease that comes along? They're not thinking that this is a vaccine whose primary use is to stop one person from spreading it to another: But the primary use of the vaccine is not to protect you from getting it when inevitably someone sneezes on you. It's to stop the guy who's going to sneeze on you from having it in the first place. To get that reproduction rate below 1. And, that's the tragedy.
You know, again, here there's more of an argument a free market might've had people taking vaccines that might've hurt them until we found out that it were--free market with data collection. I'm all for the government collecting data and saying transparently what it knows or not. But, it exposed--these turned out to be extraordinarily effective: Had we risked some people getting vaccines that might not have worked, we wouldn't be here. It would have been over by now. We'd all be vaccinated and now going back to our bars and restaurants.
Russ Roberts: So, instead, we took a long time and we have decided to distribute this vaccine--
John Cochrane: If I may interject, we're not the worst. Europe still isn't vaccinating anyone.
Russ Roberts: Why?
John Cochrane: They haven't approved the vaccines. They don't have a roll-out plan. I'm not quite sure why, but their vaccination rates in most Europe are in the 1%-2%. Anyway, please go ahead.
Russ Roberts: Well, as of today which is the end of January the 26th, Israel is the leading vaccinator with having vaccinated 44% of their population. I think the United Kingdom is around 10% and the United States is around 7%--high 6%. So, we'll talk in a little bit if we have time, and if I remember about why Israel has done so well, but as you say, we're actually doing--we're the tallest pygmy--not quite the tallest, but one of the taller pygmies.
John Cochrane: Israel is.
Russ Roberts: Israel is the tallest pygmy. You can argue they are not even a pygmy at all, but actually tall.
But, we have decided to distribute the vaccine, I think essentially at zero price to the recipients--an act of purported compassion. And as a result, we had to decide how to hand it out.
And, we decided--and this was decided, by the way, as if it was a no-brainer--to give it to the people who were either thought to be the most vulnerable, that is old people, really old people, 75 and older, or 85 and older; and healthcare workers who tragically many died in the early stages of the disease. But, lately, my impression is not so many.
You could argue that healthcare workers deserve to have access to it. They've been suffering through emotional stress and fear of getting it.
But, many, of course, that I've talked to, they've been going about their lives. They have excellent PPE, Personal Protective Equipment. They have great masks. They have gowns. They know what to do to be careful. They have a system for keeping the disease away from them.
And, then we're giving it to the elderly who have virtually no chance of spreading the disease. They are the most vulnerable--and I'll include myself in that group in the above 65 group, being 66.
So, the alternative would have been to give it to young people. Which, it fascinates me that there was no conversation about this. The doctors, who are increasingly the high priests of the pandemic--hint or sorry, I concede that--I like to think we're the high priest, the economist, but we don't get listened to much. The doctors are considered the experts because it's a medical problem.
Unfortunately, the distribution of a vaccine is not exactly a medical problem. It's related to a medical problem.
But, at any rate, the idea that we might give to young people the vaccine to allow them to return to normal life and have a job never really got talked about here in the United States except among a few people like me and you who blog about it or put it on Twitter.
So, first talk about your view on that, and then make the case for why we should have--perish the thought--sold it in the marketplace.
John Cochrane: Or allow it to be sold in the marketplace, on top of whatever the government wanted.
Yeah. Let's review quickly. So, the government bought--one last thing they did was the Operation Warp Speed where they bought a whole bunch of doses ahead of time and ramped factories up. Well--
Russ Roberts: Sorry to interrupt, John. It's important to distinguish in this because Pfizer likes to say, 'We were not part of Operation Warp Speed.' No, what they were part of was I think a $4 or $5 billion advance purchase. So, actually there's two parts to it. There were some advanced purchase agreements, which incentivized companies to take risks because they knew they'd be able to sell it; and then the second was, I think, the government actually subsidized with advanced money, the development.
John Cochrane: Yeah. So, advance purchase: companies won't build until--but the reason was because the FDA can always pull the plug on you.
Russ Roberts: Correct.
John Cochrane: So, did we need that $5 billion? Did we really need the government to do that if it wasn't also the government decreasing all the risk? I like to point out that markets seem to be very willing to subsidize Tesla's electric car ideas and Elon Musk's moonshots. $5 billion would have been easy venture capital to get if you knew you had the right to sell it based on the facts and if you knew you had the right to sell it at the price the market would bear.
It is the absence of that right that caused the need for the government to buy [?]. But, at least they did.
But, so what happened? The government bought it and still does--bought it in a monopoly: You and I are not allowed to buy it. So, the government had a monopoly on buying it; bought a bunch of doses. At least that got the production moved up. But, then there was nobody around to think about logistics. How are we going to get it out? There was a lot of thinking about rationing schemes about who gets it, but nobody really thought about logistics.
So, we lost another month or two in the battle between bureaucracy, evolution, and exponential growth. Time is of the essence, let me remind you. There are new--evolution wants to do is find new variants that are resistant to the vaccine. And, exponential growth wants to grow exponentially. So, waiting a month or two is always very dangerous.
And, then spent all this time without really having a clue about how this was going to get from factories into arms with incredibly complex ration, not just this a rationing scheme, but an incredibly complex irrational scheme. Yes, old people first, health care workers first; but then long complicated schemes including all sorts of equity considerations.
Now again, the basic conceptual problem was this was about protecting people and about transferring income, not about stopping the spread of the disease.
I remember hilariously the United Kingdom's first patient was a 91-year-old one, very charming woman. Germany's was 101-year-old woman--again, very charming, but not very likely to go out to a bar and give it to somebody else. And, in fact protectable by just having their healthcare workers be vaccinated or wear PPE equipment.
And, giving it for free is interesting. This isn't that expensive. It's $2 bucks, $5 bucks. Old people are nice, but they're not all poor. It's not clear why people--the amounts of money that we're arguing over here are trivial compared to the $5 trillion that our government has spent handing out checks on the economic basis.
So, really funny how much of this goes around to: 'Why don't old people have to pay for it?' 'Well, we want to make it easier for them.' But, it's about giving them access to protect them without having them pay for it.
So, I do think what would have worked here was a market on top, allowing us to buy the vaccine. We have to remember this is not a disease that will come and only the vaccine will save your life. This is a technology for not getting the disease and there's an alternative: Stay home.
Russ Roberts: Yup--
John Cochrane: So, the vaccine--
Russ Roberts: It's working for me so far.
John Cochrane: Yes, me too.
Russ Roberts: I'm nervous. I'm still uneasy, but so far so good.
John Cochrane: Well, we are lucky that we can do our jobs by Zoom. Most people are not so lucky. So, most people really want the vaccine as license to go out. It's license to go out, and people who got to work for a living need to go out.
Now, if you're allowed to buy it--so, what happens if the first dose is? Yeah. They go to people whose time out is really valuable--the CEOs [Chief Executive Officers], the rich, the fat cats. So, the first week or so they pay $500 bucks to get it. And, normal people say, 'I'll spend another week at home.' Then the price goes down to $50, $100 bucks, and employers already would love to buy this for their employees.
Whole Foods at $50 bucks a shot would say, 'Yeah, I'm buying it. I'm giving it to all my employees so that they can restock.'
But, Whole Foods isn't allowed to make that decision. Even if you're just protecting people, which means even if you're buying licenses to go out, that's an economic decision. And, the government's rationing rules are just not even thinking about we're buying an economic commodity. We're buying people being able to go out and earn their livings.
Teachers should be getting it, and schools should be willing to pay the market price to get teachers to get it. Because, teachers going back to work means kids can go to school and their parents can go back to jobs.
Healthcare workers--in a totally free market, of course healthcare workers would have been first. Why? Because hospitals would have found it completely worth their while to pay whatever the price is to get their healthcare workers vaccinated, to make sure they're in there. In fact, hilariously, I just read this morning, the people who make the vaccines are not allowed to give the vaccines to their own employees and are now having a big problem because their employees are getting sick and they can't keep the employees working. If they have a couple of boxes fall off of the back of the truck and by chance should end up in their employees arms, they'll get sued. They'll get dragged into court.
And, that's an example of how rationing schemes are just ridiculous to the economic. If you're just going to protect people and all of them economically go out--and God forbid, we think about not spreading the disease--this is about if you get the reproduction rate of below one, if you keep one 20-something-year-old out of a bar that 20-something-year-old doesn't give it to 50 other people, doesn't give it to [?].
Russ Roberts: So, there's a part of this that mystifies me a little bit, which is--let me set this up in the following way. In the early days of the pandemic, the worry was we were going to run out of ventilators. And a friend of mine said, 'In America, we're really good at making stuff when we put our mind to it. It may take us a while to get started but once we get started, we're going to have ventilators coming out the wazoo.' And, we do. I think, there's 180,000 in the stock, in the inventory. There was this fear that hospitals could be overrun and we'd have a ventilator shortage. That never happened, at least in the first wave. And, then we learned actually that ventilators are maybe not such a good idea to use all the time, early on for sure. And so, that crisis was averted, but probably wasn't much of a crisis to avert.
So, then we get to the vaccine. Now, you'd think that having a President who had been in business, he would be sort of interested in sort of a private sector kind of solution like tasking FedEx to distribute the vaccine or CVS [Consumer Value Stores (a pharmacy)]. But he didn't, for whatever reason. Okay. That would have been interesting--politically, maybe non-viable, although now it's starting to look like part of what we're going to actually do. But, he didn't do that. So, I'm not going to--I don't know--we'll find out how much he had to deal with if the distribution process--history will reveal it, maybe. But, then you have this large public health bureaucracy. You have the CDC, you have Fauci, you have others. At the state level you've got all these other folks. They have known since January [January 2020--Econlib Ed.] that a vaccine is coming. They do know--they really do--that it's got to go from the lab into an arm.
It's not enough just to have it in the lab. Which means you have to have a lot of it. And, you have to have a way to get it to the people before it'll get into their arm. What the heck was going on? That's my first question.
My second question is: Right now, we've got to be spending a lot of time making--people keep saying, 'Well, we'd like to go group 1C,' which in my state of Maryland is people over the age of 65. And we did. We went there yesterday, but 'Oh, alas, there are no vaccines. There weren't enough of them. So, you're going to wait till we vaccinate every person over the age of 75 and every teacher and every healthcare worker.' Maybe. But for whatever reason there aren't enough, because right now we're rationing on queuing, getting onto the website, being lucky and punching in at the right time.
It's a horrible system. Fair--because it's equally horrible for almost everyone.
But, like--how hard are they working on getting a few more extra ones made? I mean, wouldn't you kind of want to focus on that? Like, World War II, we were the arsenal of democracy; and we made as many planes and bullets, and we just destroyed--we killed it. It was really important and we killed it. Isn't anybody trying to get Moderna and Pfizer to like--? Maybe, I don't know, are they at full speed? Maybe they already are. I heard Moderna expanded; that's great. But, I wonder if it'll expand a little bit more or maybe a little faster. And, as you say, since we've taken out the financial incentive, because they can't charge the market price for it, well, could you give them some money? I'm done. Your turn.
John Cochrane: Or how about just let us give them some money. 'Get out of the way,' is always the first response to--if, God forbid, that they do what they're talking about and invoke the Defense Production Act--which is the government--
Russ Roberts: Which they did! Which they did for ventilators.
John Cochrane: Exactly. The last thing you need--how about let's just get out of the way and let people buy. We are not allowed to buy the vaccine. Which would do a lot towards incentivizing people.
I don't know what the regulations are for you not putting up a factory that makes the vaccine. I'm going to guess that they're there.
Russ Roberts: Yes. [?] don't own it. They own it. I'm okay with them owning it--
John Cochrane: You could license it. But--
Russ Roberts: They could. Yeah, that's a good question: Why haven't they? I don't know.
John Cochrane: But, you are not allowed--you have a monopoly customer. The Federal government is the only one buying the vaccines.
It is amazing that nobody thought about the logistical. It's very easy to sit around Washington, drop lists of who is the most deserving. But nobody thought about the logistical questions, which--you know, 'We got to get flu vaccines in arms every fall,' those happen.
I do gather that Jeff Bezos called Biden a day after the inauguration and offered Amazon services. So, if it'll land and--our past President was a businessman, but he was a real estate developer.
Russ Roberts: Good point.
John Cochrane: Which is a--
Russ Roberts: It's true.
John Cochrane: a very different business from supply, logistics, rapid response, and so forth.
But, this is just part of the snafu that's been going on a long--well, let's go back to last spring. Not just ventilators. Masks. Personal protective equipment. Why a mask costs 50 cents and must cost three cents to produce. I'm talking a good N95 mask, the kind that protects you as well as protects the other person. Surgical masks--we ran out of those. How the hell can the most advanced industrial economy in the world disposed of the most flexible production capacity run out of five-cent masks that you could charge five bucks for down at CVS and make a killing?
Well, they weren't properly certified. We weren't allowed to import them from China because we don't like importing things from China. China had made a lot of masks that were certified for the European Union but not certified for the United States. Masks that are just the same, but that are certified for construction site use couldn't be used. And, it went on to this ridiculous thing. We spent three to four months--we still are using homemade cloth masks.
Just think about this. In a pandemic that's costing the government directly $5 trillion in the economy, God knows how much more, we are using the same technology that Venice used in 1350 to combat the plague, except they had much nicer noses and funny things on top of their masks. Just to make--why? Obviously, because there wasn't a free market in being able to produce and sell masks, basic personal protective equipment.
The same thing also, by the way: treatments. We stopped using ventilators because we discovered better treatments. But there's a whole raft of treatments that have been slowed down and slow to roll out like the antibody treatments. Yeah, hydroxychloroquine probably wasn't the best one. But, there's been a whole bunch more that are kind of languishing. They're not being used. Wellm again, we're all stuck in the same system.
Russ Roberts: I actually saw a fascinating article that hydroxychloroquine or however you pronounce it--
John Cochrane: Yes, sorry.
Russ Roberts: That it worked--I don't know how to pronounce it. But, that it actually--we'll put a link to it, it's an article by Norman Doidge in Tablet. I don't know if he's right, but it was provocative, suggesting that the clinical trials that were run that found that it actually reduced your life expectancy--which was greeted with great joy in some quarters because it showed that Trump was an idiot--that actually those trials were not really the right test. It should have been tested earlier in the disease where it has proved to be more effective--actually effective and not dangerous. I hope that's not true, but I just worry that it is--because it's such a tragedy of that lives could have been saved.
John Cochrane: Well, that's part of a larger drug testing problem that we face. If you have a new drug, you're first allowed to try it on people who are going to die anyway and see if you get a miracle. Well, if the drug is only effective earlier on in the course of a disease, you're not going to pick that up that way.
Russ Roberts: Yeah. But, going back to masks, there were--the Federal government was aggressive in preventing people from making any kind of so-called excessive profits from the sale of them. Which was a tragedy, obviously, because it took out any incentive to produce them at higher speed by incurring the extra costs of hiring people and the input costs of the materials and so on that would have maybe been in higher demand and might've cost you more money.
But, certainly the puzzle for me and this is a question for you, John, is that masks weren't the only things in short supply. And many things remain in short supply today, a year into the pandemic--as if we were living in wartime--where research that had to be devoted to tanks; and therefore washing machines are hard to get.
So, toilet paper was in short supply. Anything made out of paper--paper towels, toilet paper, and so on. Then there's a whole bunch of stay-at-home stuff that was in short supply for a long time. Bird feeders, jigsaw puzzles, baking equipment, anything related to baking because a lot of people got into bread. So, flour was in short supply, freezers were in short supply because people were worried they wouldn't be able to go out and they wanted to stock up.
How do we square this with your view, and my view, which I think we share, that prices prevent shortages? And, one thing I think--one possibility is that manufacturers were afraid they'd be accused of price gouging.
But, I think the other more realistic case in some of these examples--not masks, but in the rest of them--is that a lot of manufacturers and retailers did not want to raise their prices for public relations reasons, which means we don't really have much of a free market system, if that's true. A lot of places kept the prices the same, didn't want to take advantage of people in the pandemic, which meant there wasn't a bunch of it to go around. That's a different way of taking advantage of people in a pandemic except nobody benefited from it. What are your thoughts on that?
John Cochrane: Yeah. It is very interesting. So, Econ 101 says you do not screw the price system in order to transfer incomes, because for just about everything, the total amount of income isn't that big and the prices allocate the resources to where they are most valuable--
Russ Roberts: And, make sure that there's a lot of them available. That's the part people I think often forget. They think it's like a zero sum game: the rich will get it and then the poor didn't; and that's unfair. It's not attractive, for sure. But, if you don't allow prices to change, you don't create the incentive for people to make the stuff; and then no one gets it.
John Cochrane: Exactly. Which is--it's funny that people are complaining, 'Oh, the pharmaceutical companies will make $10 billion off of the vaccines'--
Russ Roberts: Please--
John Cochrane: Let them to make a $100 billion. A trillion dollars. This thing is costing us way more than that.
So, we're killing the price system and its incentivizing role in order to transfer minuscule amounts of income.
And, that's the difference between--in World War II, you need a lot of resources to build an aircraft carrier, and it might be a case for the Defense Production Act; and it puts a stress on the government's finances.
The amount of money we're talking here is just chump change in the government's finances.
Now, so toilet paper. Let's just start with a simple one. This is really your test for are you an economist or not: Should companies be allowed to raise the price of toilet paper, or should you be allowed to resell toilet paper that you've gotten during a crisis? When in a hurricane, should you be allowed to raise the price of plywood, when a hurricane is coming? Whould we be allowed to raise the price of gas when the gas isn't coming?
And, to us, this is just so obvious because--let's just review for everybody--the allocation effect. Do you really have to go? Toilet paper, if you allow the price to go up, goes to the people who really need it, which is people who don't happen to have a lot of livestock already and who really got to go.
Also letting the price go up is--if you want to stop people from hoarding--people were going down to CVS, to Costco, and buying truckloads while they could get it. Why are they doing that? Because they know it won't be around in the future and they think the price might be higher in the future. If it's available at $10 bucks a roll today, the same person says, 'Maybe I won't take it. I'll do my social thing.' Prices guide you to the socially efficient thing. 'I'll just get one roll today because I know I can come back tomorrow and the price will likely be lower tomorrow.'
It incentivizes paper companies to make more toilet paper. It incentivizes truckers.
This was perfectly clear in the gasoline case after the hurricanes. If gas prices go up, it's worth somebody who owns a truck to put gas in the truck, drive to Manhattan, and sell the gas at $20 bucks a gallon. If price is capped, then nobody can get it. Not even the ambulances can get it.
So, is this just--a lot of this is fear of the government, even when there isn't a price gouging. Government has made it very clear that--City of New York was very aggressive about closing down bodegas who dared to charge a little more for paper products than they used to. I think there is fear that ex-post, Attorneys General will come after you and make a big case out of you for price gouging. It's not just public relations, but a lot of it is public relations.
This is simply a fact that most of our fellow citizens don't understand. And, I'll tell you a quick story. I learned this--I was driving across the country with four children, a dog and my mother and we were on our way to Boston. It was about 10:00 o'clock at night. We needed a hotel. It turned out we had driven right through Woodstock [?] and there weren't any hotels around. This was before the internet. So, it was hard to know: is there a hotel around? So, we try. Four hotels were full, were full, were full. We finally go into a broken down Super Eight hotel. And, the guy says, 'Yeah, I got one room left. It's $450 a night.'
Me, the economist says, 'Hallelujah. Thank you. Sold!' I've got four kids. I've got a dog. I've got a mom and I'm so delighted that you charge $450 because I know the last 10 people who came in said, '$450? I'd rather drive through the night.' Well, it was worth it to me not to, not because I'm rich but because I've got four kids and a mom in the car. My mom was outraged. 'How dare he charge so much? This is--' 'Mom, we've got the money. We need it. If he didn't do this, we would be sleeping in the car.' No way, absolutely, could she get that. Three days later she's still, 'That guy, he was so mean. He was charging us that money.'
As far as transfers of income, $400 bucks for one night in a hotel isn't going to kill us or anyone else; isn't it worth to you? This is kind of deeply ingrained in how people think about it--when they are voting for politicians as well as when they're thinking about companies.
So, there is some public relations to it. And, I think that's why politicians--if they stood up and said free market and toilet paper, people would be mad as hell at them because, 'Why do I have to pay more than I usually have to pay?' and to explain to them, 'So that the other guy won't take it all out of the store is why you got to pay more. So that someone will get on a truck and bring it to you is why you got to pay more.' Politicians don't seem willing or able to explain that.
Russ Roberts: So, I'm going to go back to vaccines for a minute--just because I think I probably am so in agreement with you, I may not have given you a hard enough time.
Russ Roberts: And, there is one little part I think you may have glossed over I want to actually give you a hard time, which is: You really would have let it be sold on the free market so poor people couldn't be vaccinated?
John Cochrane: You're trying the--poor people can't afford the toilet paper.
Russ Roberts: Yeah. But, this is a vaccine, this isn't toilet paper. Toilet paper, there are substitutes. You could try to use a little bit less; great buy, wait a little longer before you need a new roll. This vaccine is a lifesaver. 'If you let the market solve it, you're just going to let the rich people survive and the poor people are going to be the ones that die from the disease.'
John Cochrane: The right answer, which I will not offer is it's looking like the cost per dose is perfectly within the range of even poor people. But, I won't give that answer. I only argue for a free market on top of: let the government buy at market prices--which is, compared to $5 trillion budget that is nothing--let the government buy and give it out to whoever it would like to. If the government to prioritize poor people, 101-year-old people in nursing homes who have dementia and it wants to give it to them for free, fine. I'd like the government, in fact, to buy a bunch at market prices, give it to homeless people, give it to people who are wandering, and, like, prisoners. Oh my God, prisoners should have been first. They forgot about that. Prisoners should have been first on the list. Teachers. The government should be giving it to control the externality and protect the poor and the vulnerable.
I only want a free market on top of that. Because again, this is not the case--if this were a case of a disease that's going anyway and there's nothing you can do, we're not going to save your life, we might have a harder discussion. Right now, it's a case of 'Can you afford to stay home for another two weeks? Do you have to be one of the very first to get it while it's still hard?' I'm going to make up a number. 'Maybe that's going to cost $500 bucks? Or, can you wait three weeks until it costs $50 bucks?' Oh. Well, that's an economic decision and the alternative is stay home. And, 'I'm fine.'
How about instead of $2,000 stimulus checks--about the dumbest idea that a government has ever come up with and it's a mostly Republican idea--instead of a $2,000 stimulus check, how about a $2,000 stimulus voucher that you could use to get a vaccine if you'd like? The cost for the vaccine dose is going to be way under $2000. Or, if you choose to, you can say, 'I'll let somebody else have the vaccine and use that voucher to go buy, I don't know, toilet paper.'
So, the answer is always in economics: Let the price system work, transfer incomes. Usually the answer is, 'But we don't transfer the income.' Well, right now we're transferring a bunch of incomes. So, let's just make that salient. The $2,000 comes with a voucher--a resalable voucher--for the vaccine. Now you've just got rid of the 'can't afford' argument and you're back on the 'choose to' argument.
Russ Roberts: So, the only problem I have with that is you used the phrase 'free market price.' So, right now we have two companies in America--there could be three if we let AstraZeneca produce it--there'll be three companies. That might produce enough price competition to get a low price.
The reason the price is low right now, or that you think there's a low price, John, is partly because the government negotiated a low price.
I should mention: I said I'd say something about Israel. I have not told listeners yet, but I'm going to be moving to Israel soon. If you follow me on Twitter you know it. I'm going to be President of Shalem College. I'll put a link up with some information about that. But, Israel has done very well. I'm going to continue with EconTalk by the way for listeners who were hoping otherwise so they'd have more free time. But, at any rate Israel, remarkably, has done extremely well, partly because they have a semi-centralized, but not totally centralized healthcare system.
They're a small country, basically have four healthcare HMOs [Health Maintenance Organizations]. Those HMOs basically know all their patients among those four, or the population. It's a small place--about nine million people. So, among those four HMOs, they know all the people in the country; and each one I think got a lot of the vaccine and knew how to find people. They had their emails.
That isn't true in the United States. So, at the state level, which is how we've distributed it here, we've got just a giant mess of people trying to figure out something for the first time, creating websites. And, it's terrible here in Maryland. We're really ineffective and it's badly done.
But, the other thing that happened is that I understand that Netanyahu promised Pfizer a lot of data about the people who took the vaccine, which wouldn't have flown here in the United States, I don't think, quite as well.
And, I also understand he paid a little bit of a premium.
Now the United States government did not pay a premium or whatever you want to call it. They picked a price. But it was relatively low. If we had lived in your world, my fear is that we would've had actually quite a high price for the vaccine, because they would have had either monopoly or duopoly. And, now all the nice parts that you're talking about would have been a long time coming, maybe. And, it would have been politically pretty hard to do. What's your thought?
John Cochrane: We would have had a high priced vaccine and it would have happened in July.
Russ Roberts: Okay. Maybe.
John Cochrane: So, that by now--
Russ Roberts: Oh, they had them on the shelves already when the thing struck.
John Cochrane: Second, this is a vaccine that took one weekend to create, once you had an email with the genetic code for the COVID-19 in hand. So, to the extent that it's a monopoly, the intellectual property is only a monopoly if that's enforced. And, then it was designed a little bit. So, creating a competitor that--the bottleneck is getting FDA approval for the vaccine. The bottleneck is not creating the vaccine.
The bottlenecks are not about getting vaccines in arms. It's about doing the paperwork. It's about making sure that the wrong person doesn't get it. You have long forms to fill out. I've seen numbers that takes 20 person-minutes to deliver one vaccine, all of it because the paperwork. So, simply--how about government, whoever buys it, come and get it in arms? We would had a lot more done.
Now, in fact since the rationing schemes have mostly been about protecting people in nursing homes, it's not clear to me that the spread of the disease would be any slower if they had simply said, 'Come and get it.' And, even now, it's roadblocks in the way.
Virginia on Marginal Revolution [marginalrevolution.com ?], Virginia just said, 'Nope, we can't give it in hospitals. You can only get at county testing centers.' I mean, talk about getting in the way of vaccine distribution as opposed to just: We're trying to combat a communicable disease, get it in arms fast. I think that would have--you don't need to call people. So, you said, 'Yeah, Israel knows everybody's phone number.' They don't need to call people. Just say: It's available down here.
Russ Roberts: But they didn't. Yeah. They didn't. What they had available was--well, that was a couple of pieces. You're right. They didn't have to email people and say, 'It's here.' Unlike my 89-year-old, my 87-year-old, 88-year-old mom--sorry mom, revealing your age. But, she lives in Alabama. She registered for the vaccine. They told her they'd call her. I'm thinking, 'What? In 2020, you're going to call my mom?' My mom does email very well, by the way. But, then her friends, who had registered after her, got the vaccine. She thought, 'Oh, maybe they missed me.' She called them. 'No, no, we've got you on the list. You're 2500 out of 60-something thousand of people of your age group.' And, she eventually got one. So, she has gotten it. But, what a strange thing that that's how we're distributing them. Bizarre.
Russ Roberts: Yeah. You agree. Let's close with lessons learned. So, we've focused on a number of lessons about the use of pricing and innovation and incentives. To me, the big issue going forward, the next one of these happens, is that I think the default option is lockdown. And, my impression is that lockdown has been, if not ineffective, not very effective relative to its cost in human sacrifice and toll and despair and loss of dignity and education for young people. It's been, I think, a very expensive policy.
Many people believe it was necessary. In fact, they would argue we didn't do enough of it. We should have done more. We should have been like fill-in-the-blank, a country that has fewer cases than we do, or fewer deaths. What are your thoughts for the next time? What are the key policy levers that we ought to be doing? One that you've already identified: we should have testing available more quickly. Vaccines should be generated more quickly through incentives, distributed more quickly through incentives, and so on. What about the rest of the picture?
John Cochrane: So, sadly, there are the lessons you and I are learning, and many other people who are sort of learning factual lessons about the failures of bureaucracy and how to handle a pandemic.
There are the lessons that I think our political system is going to learn, and I think you point to the problem. Our political system seems to believe that whatever we did last time and we survived is the right thing to do.
And so, what we would recommend is an attack on the bureaucracy and making sure--people didn't discover all sorts of regulations, like: Medicare won't reimburse telehealth. That those probably weren't a good idea. Nurses can't work in a state where they don't have an occupational license--probably a bad idea. I'm hoping, at least we learned that some of those things were pointless and don't come back. But, I suspect that the forces in favor of those will come back.
So, yeah, the policy mix was bureaucratic, complete snafu, really not able to make that transition from 'Protect individuals' to 'Stop the spread of a fast communicating disease. Economic lockdown and spreading vast amounts of government money all over the place while at the same time being very chintzy about a couple billion here and a couple billion there--I'm afraid that we'll get written as what we do next time, just as all the mistakes of 2008 got written down as how we're going to handle a banking crisis forevermore in the future; and all sorts of, 'Oh, we learned how we should reform the financial system' went by the wayside.
I think the lockdown was particularly ineffective. There's enough voice in the public sphere on both sides saying that was a disastrous policy, that I hope we won't have to do it.
It is revealing about our government that our government can control economic activity very finely, but is unable to control personal activity. This is not a disease that spreads by the production of GDP [Gross Domestic Product]. This is a disease that spreads when people are inside poorly ventilated areas talking loudly. It's a disease that spreads at parties, at choir practice, at funerals, in bars, it's the only business--it's not a disease that spreads in an auto-body paint shop where everybody--but we closed down the auto-body paint shops.
So, I argued long ago for not an economic lockdown, but smart: We need a set of public health guidelines that lets the economy keep going while protecting people from the disease.
And, again, you don't have to be perfect. You just have to get the super-spreading stuff under control. As most business has worked out, people are back on construction sites. They wear masks, they mostly work outside. They take a great effort to ventilate. They try to test people. They see who's sick.
You can run things smart. So, I call that the smart reopening. And, a much more strenuous campaign: 'Guys, you've got to stop partying.'
And, it turns out masks were useful; and even when the government was saying they were not.
So, I think economic lockdown--it was a case of the perfect being the enemy of the perfectly reasonable. And, we locked down enormous amounts of GDP, and people's lives, that we're not contributing to the spread at all. You just got to get the reproduction rate under one, stop the super-spreader stuff.
The one thing I wish government would do a lot more of is information--both spreading information and science. It's amazing how little we know about this disease even now.
Russ Roberts: It's so frustrating to me. But is that just the nature of reality or do you think the government has failed to collect the data that they could have?
John Cochrane: Well--the government did not collect it.
So, let's just start with: Why did we never have random sample testing, to learn where--you just test one out of a 1000 people randomly and learn the true prevalence of it? All our test numbers are people who feel sick and call in and ask for a test. And, then all of our tiers are based on what fraction of those are positive. Well, that's a completely meaningless number.
So, just randomly test one out of a 1000 people, find out where the disease is; sequence them, find out which variants are spreading. Give that information. When I walk into the Whole Foods in Palo Alto, how many of my neighbors are actively contagious right now? That's a number I don't know.
And, basic science: Figure out where this thing spreads. Does this thing spread in parks? Does it spread by touching things? Turns out probably not, but we don't really know. Does it spread in grocery stores? Does indoor ventilation help?
The problem with our science establishment, I think--we're largely, we're based on individuals who have ideas. This needs big science. It needs established--the government needs to go out--if you want to test one in a 1000 people in the country every week and map where it is, that's something that government-run science kind of has to do, or at least an enormous philanthropic thing that then has some of the tools of government to kind of roll it out.
So, monitoring--when it was first there, monitoring where it is: which places have it, which places don't? Do we need to think about ring-fencing some places than[?] others?
We just--so both the information, random testing and sequencing to know where it really is. It seemed like an obvious thing in February [February 2020?--Econlib Ed.]. We're not even thinking about doing it.
Of course, the testing and tracing effort has been a complete fiasco. And, this is the kind of big science about learning how to quickly, how is this thing spreading? What really would--why is a restaurant outside better? It's kind of hilarious. Look at Palo Alto. There were restaurants that were outside that have plastic walls all around an indoor propane heater. Is that really better than inside where instead you've installed a high volume ventilation system with a HEPA [High-Efficiency Particulate Air] filter? I don't know. Why don't we find out before we take one third of the economy?
Russ Roberts: Let's close with this--I said we were going to close, but let's close with one more thing. Recording this in late January of 2021, there are new variants out already. There are some worries that the vaccines might have to be modified although there's some evidence that they seem to work against these new ones as well; but there will be other variations. There'll be another virus down the road. I find it extraordinary--and, this is another observation about the previous Administration that was so shocking--we had a President who was openly antagonistic to China, was happy to go to economic war with them over tariffs and the treatment of intellectual property. And, yet he did not make a campaign issue out of the fact that the virus originated in China and that China has done everything they can to stymie attempts to understand how it spread from China and where it came from within China. That the World Health Organization [WHO], which the current Administration has happily rejoined instantly, has been manipulated by China to not be able to explore those questions.
We could debate, I don't want to, whether how many lives were lost because of a failure of leadership in the White House or on 10 Downing Street or in other capitals around the world. But, China has some responsibility for this. And, is no one going to hold them accountable? Is this just a free lunch for them? I mean, a horrible free lunch, a tragic free lunch if somebody cares. But, shouldn't the world say to them, 'If you want to play with us, if we're going to have international economy, which you desperately need, you have to play by certain rules of transparency?' Instead it's like, 'Oh well, let's hope there isn't another one down the road.' I don't get that. I find that weird. What do you think?
John Cochrane: So, you brought up a couple of things which I'd like to respond to. One is, I think: Let's not fall into the trap of too much contemporary political discourse to regard the President as the god/king who is in charge of everything and he knows what goes on and directs all activity.
Russ Roberts: And, all outcomes are his blessing or his curse.
John Cochrane: Yes. 'If only the Führer had knew,' as the Germans kept saying in the 1930s. That's not how it works.
Especially in public health. It relies on bureaucracy, on a competent state capacity, on a competent Federal bureaucracy, on a competent local bureaucracy. Public health is not something well-directed by--if you've ever been in the White House, it's just shocking how small it is, how few people there are there and how little they actually know about how things run. The President--you need a DMV [Department of Motor Vehicles] to administer a Driver's License test. The President can't be in charge of that.
So, the President's job is to build a competent bureaucracy and make sure that this bureaucracy learns from its failures before the next one comes. And get that state capacity back up. And, it's also worldwide. So, I'm not a big fan of Trump on many issues; but many other countries failed, just as much as us. And, it is just a mistake to look to--the President is the central focus for how do you handle a pandemic. This is--there is a lot of them--
Russ Roberts: You're saying he shouldn't be: that it's a bigger question.
John Cochrane: You need leadership at the top and you need not scoring up at the top. But, you need competent bureaucracy to both feed incorrect information and to--the President could make big decisions, but do we approve the vaccine or not, that's not a presidential decision. How do you know? The President maybe should have said, 'Actually, how do you get vaccines in arms?' is a state and local decision. We need a competent--the President can't say 'Russ Roberts's mom needs to go next in line.' Right? You need somebody who knows that all right, the website and answer the phones and get those things working. But, building that bureaucracy, as well as--we had pandemic plans. We had stockpiles of masks and gowns. And they all kind of got forgotten and left to rot.
So, keeping that. Because there will be another one.
First, so, right now we're kind of in 'the vaccine will save us.' I remember being, in November, all skeptical of that and my fellow in another podcast I did in November. 'Oh, no, John. You're grumpy again. It'll all be done by spring.' And, then look at the snafu we had.
There will be more snafus, the unknowns will unknown. New variants, evolution, and exponential growth are there. The way diseases--this one has reservoirs. So, it's not going to go away, certainly, until the whole world is vaccinated. The way these things works, and it goes that way in the United States, we're all vaccinated--but it hides out somewhere else, either in animals or in other parts of the world. And, then somebody flies back in and then it comes back. We do not--as far as we know, this vaccine does not give permanent immunity.
So, within a year or two, everybody has lost immunity. So, even this one could well have several waves if not correctly managed. There will be another one. This is only H1N1, SARS, Ebola--every globalized world has pandemics, respiratory since--we figured out how to stop water-borne diseases, but respiratory viruses.
China is the source of this one. China has been the source of most of the other ones, too. This one is especially, it looks like it came out of the lab and moved on. Now, I want to--we don't know that, but a lot of evidence points to that, which is something that China's going to be very reluctant to admit. But, the previous ones didn't come out of wet food markets in China, or the habit of close contact between ducks and pigs and chickens where viruses move around and learn to mutate. So, yeah, it needs a competent worldwide bureaucracy that isn't completely politicized into protecting China. Keep your eyes open: another one's coming.
Russ Roberts: My guest today has been John Cochrane. John, thanks for being part of EconTalk.
John Cochrane: It's always a pleasure, Russ.