Category: reason

Ordinarily, pharmaceutical companies are motivated by the prospect of profits from legally guaranteed exclusivity, provided either by the patent system or the FDA. Life-savings drugs are priced aggressively, leading to familiar debates about whether the costs are worth the benefits in promoting innovation. Covid-19 vaccines enjoy at least the possibility of patent protection, but companies like Moderna have pledged not to enforce their patent rights during the pandemic. Meanwhile, the companies are charging governments bargain basement prices for the vaccines they produce. Researchers have estimated the value of a vaccine at between 5% and 15% of global wealth, but pharmaceutical companies will receive nowhere near that much. Moderna’s market capitalization, for example, is only around $54 billion, while global wealth is around $360 trillion.

While the vaccine companies deserve kudos, self-interest is presumably playing a significant role. Moderna will surely make money on its vaccines, but much of the company’s value is likely attributable to the possibility that its mRNA and other technology will be useful for diseases besides Covid-19. This may help explain why the vaccine companies were willing to part with vaccine so cheaply. The demonstration that their vaccine platform can be safe is valuable. The goodwill that the vaccine companies earn with the public, and at least as importantly with drug regulators around the world, may be worth a lot too. The vaccine companies may also have suspected that they would not be granted Emergency Use Authorization if they did not promise to distribute their vaccines relatively cheaply. There is little sense in developing a vaccine for a pandemic if the government will slow-walk approval.

The result is that the incentives for vaccine development more closely resemble those of grants and rewards rather than those typically afforded by the patent system. The grants were the ex ante funding, from sources like Operation Warp Speed, and the rewards came in the form of government contracts, plus earned goodwill, after vaccines proved successful. Of course, it’s nothing new for governments to purchase drugs. Benjamin Roin has argued persuasively that even though prizes and reward systems of intellectual property are often seen as alternatives to the patent system, in fact various government purchasing and subsidy arrangements amount to de facto prize and reward systems that act as complements to our patent and regulatory exclusivities. Can we then draw any conclusions about prize or reward systems from the Covid-19 experience?

One tempting conclusion might be that intellectual property is unnecessary or that government should take patents, paying considerably less than what the patentees could earn on the market. For example, Hannah Brennan, Amy Kapczynski, Christine Monahan, and Zain Rizvi have urged the government to use 28 U.S.C. § 1498 to involuntarily license various pharmaceuticals. The government would be required to reimburse the pharmaceutical companies, but Brennan et al. urge a payment formula based on risk-adjusted research and development costs that, they say, would result in much lower revenue for the pharmaceutical companies. More radically still, one might imagine abolishing the patent size and creating a reward system in its place. Jamie Love, for example, has argued for a system in which a fixed amount of money is devoted annually to pharmaceutical innovation. Supporters of such systems might point out that the non-patent rewards during the Covid-19 pandemic were sufficient to lead to the development of vaccines and that if the pharmaceutical companies instead had set prices at their profit-maximizing value, the vaccines would have been much more expensive.

In my view, Covid-19 cuts in the opposite direction, for three reasons. First, governmental funding of COVID-19 was way too low, as Alex Tabarrok has repeatedly pointed out. If profits, from whatever source, had been at all proportional to the benefits provided, the population would likely have been vaccinated by now. The elasticity of supply of vaccines is not zero. Sure, the vaccine companies have worked very hard at producing vaccines, starting their supply chains much earlier than would have been the case with a typical vaccine. But if they had invested ten or a hundred times more money, writing incentive-laden contracts with their own suppliers, the supply chain would have responded. The U.S. government has just now brokered a deal between Merck and Johnson & Johnson for the former to produce the latter’s vaccine. With enough incentives, the market could have produced such a deal without any government interference. More importantly, it could have done so long ago, so that the new capacity would already be available, instead of anticipated in several months, after there will already be enough vaccine capacity for the United States. Meanwhile, vaccine manufacturers have built new factories. With enough incentives, they could have built more such factories. Those factories may be competing for other supply chain inputs, but government spending commensurate with the challenge could have generated much more supply. If a patent prize or reward system requires the government to be sensible in allocating an appropriate amount of money ex ante, the fact that the United States invested too little money does not inspire great confidence. And the rest of the world, other than Israel, was even more short-sighted.

Second, Covid reinforces what has long been apparent, that pharmaceutical research is highly risky, with the vast majority of research efforts ultimately failing. Covid-19 vaccines have been quite successful, but there have still been many failures, such as that of Sanofi and GlaxoSmithKline. Brennan et al. are not oblivious to considerations of risk and would insist that the government should reimburse pharmaceutical companies for their risk-adjusted R&D. But there is a danger that the government will underestimate risk. Hindsight bias may make it seem that a successful drug was destined for success from the beginning. Moreover, the government may focus more on spending narrowly targeted toward the particular problem, rather than spending to create the company and infrastructure that then were able to address the problem. Most of the value provided by the pharmaceutical companies was provided before the pandemic, and absent the pandemic, investors in companies like Novavax would have been empty-handed. A risk-adjustment allocation may place too little emphasis on dangers of wasted investment long in the past, when companies and facilities were created. Completely ex post rewards set by the government also might be set too low.

Third, when the government decides how much a pharmaceutical company should be reimbursed for its efforts, it may tend to place too little emphasis on non-R&D investments. Love, for example, has criticized pharmaceutical companies for “wasteful spending on marketing.” That may often be the case, but Covid-19 at least has helped illustrate the importance of pharmaceutical competencies in clinical trials, in production, and in scaling up inventions. As has been pointed out before, Moderna’s vaccine was invented by January 13, 2020. The challenge was not invention but all of the subsequent steps. And one might wonder whether some of the logistics of rolling out the vaccine would have been smoother if the pharmaceutical companies were charged with distribution and paid based on a reasonable measure of lives saved. If the patent system were replaced with a reward system, the government would likely shortchange non-R&D contributions, just as it has not relied on pharmaceutical companies or big businesses to get the produced vaccines into arms.

The knock on governmental reward systems has always been that the government might shortchange inventors, once their inventions are complete. The famous story used to illustrate this tendency is that of John Harrison, who invented a timepiece that could be used by navigators to determine longitude but was not awarded all of a promised prize. My colleague Jonathan Siegel argues that in fact Harrison was fairly treated, as the Board of Longitude reasonably interpreted the statute creating the prize. After all, Harrison invented a single timepiece, not a production line that could churn out timepieces that could be used to solve the longitude problem. Ultimately, the episode may show both that government rewards will be too low relative to their social value and that a benefit of reward systems is that they can take into account a range of considerations, not only the occurrence of an invention but also efforts by the inventor and others that contribute to effective commercialization and distribution.

It is possible to imagine a reward system that could only increase innovation and that could provide incentives for the diverse contributions needed to bring successful drugs and other inventions to market. In my own writing on patent rewards, I have argued for an optional system. The government would create a fund, committing some amount of money ex ante, but inventors would be able to choose between exploiting patents and seeking money from the fund. If the government puts too little money in the fund, we’d be no worse off than in the absence of the fund, and probably a little bit better off, because those most likely to take advantage of it would be those who have contributions that are hard to monetize through patents. The experience with Covid-19 suggests to me that the government probably would put too little money in such a fund. That’s not a reason to give up on prize and reward alternatives to patents (for my review of the literature on this topic, see here), but it highlights that any design for a reward system cannot rely entirely on governmental grace to set an appropriate compensation level.

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In 2019, Deveís Hernandez couldn’t earn enough in Venezuela to keep his wife and two daughters fed, no matter how much he worked. So he spent the last of his savings on a series of bus trips from Puerto La Cruz, a small city on the northeastern coast, to Cúcuta, on the Colombian-Venezuelan border. He took up the gauntlet of a lawless frontier and left his homeland behind in hopes of building a better future.

By the time he crossed the border informally via a smuggling path controlled by criminals, his earthly possessions consisted of two pairs of shoes, a Captain America backpack, the clothes on his back, and a few pairs of socks.

From there he walked about 400 miles to the Colombian capital, Bogota, where he found a job in a recycling center. For a year, he worked under the table for about $9 a day, a bit less than the minimum wage in Colombia, which is $260 a month. He has been saving ever since to send for his family. “I won’t make my daughters walk the trochas,” he says, using the slang term for dangerous smuggling paths on the border.

So when President Iván Duque announced at the end of February that Colombia would extend full resident status to the almost 2 million Venezuelan migrants in Colombia as well as a path to citizenship, Hernandez was elated.

“This means I can finally get a real job,” he says. “With luck, I won’t have to live off scraps.” He also hopes the measures will make it considerably easier to enroll his daughters in school when they arrive, an issue he has worried about since he lacks even basic paperwork for identification purposes.

Hernandez is one of 5.4 million Venezuelans that the United Nations estimates have fled their country due to violence, insecurity and threats; a collapsed economy; and a lack of food, medicine, and essential services. The International Monetary Fund expects that number to nearly double, to 10 million, by the end of 2023. As of January 2020, more than 1.7 million of those migrants were currently in Colombia.

Colombia will soon be offering migrants a full welcome. Duque’s announcement means Colombia will give nearly 2 million immigrants—almost 5 percent of Colombia’s total population—the ability to work legally and have access to education and health care systems. Those who register with the government will be put on a path to full citizenship.

Colombia’s choice stands in sharp contrast to the United States, where migrants from Central America must wait months on the Southern border in squalid conditions, where mass deportations (even amid a pandemic) are commonplace, and where even immigrants who have lived in the country for 20 years might find themselves ripped away from their families and banished from their new homeland for simply being in the wrong place at the wrong time.

As politicians in the United States talked of border walls and anchor babies while the government spent hundreds of millions of dollars for Immigration and Customs Enforcement (ICE) agents to stalk undocumented migrants, Colombia was conducting the largest open borders experiment the modern world has ever seen.

Since even before the Venezuelan collapse began in earnest in 2015, migrants needed only basic identification to enter Colombia. As former President Barack Obama, and successor Donald Trump, caged those trying to cross the U.S.-Mexico border, Colombia was officially welcoming a much larger quantity of refugees in comparison with its population—and with far less resources.

The United States has a GDP 60 times that of Colombia, despite having just over seven times the population. Colombia also has a poverty rate nearly four times that of the U.S., at 35.7 percent.

Yet, in sharp contrast with the U.S. and regional neighbors like Ecuador and Peru, Colombia kept its border open to Venezuelans until the arrival of the COVID-19 pandemic in March 2020. The Venezuelan exodus has been a rare real-life trial case of how mass migration affects host countries. And the data have shown that most of the anti-immigrant arguments heard in both countries couldn’t possibly be more wrong.

Economic prophecies of mass unemployment never came to pass. In fact, data from the Colombian central bank suggests that migration may have super-charged the Colombian economy, which experienced record growth between 2015 and 2020 before the pandemic crushed the economies of the entire region. Increased consumer demand, spending due to increased consumption, and a workforce that is often self-employed informally all contributed to a net positive effect on the Colombian economy.

Although migration did depress the wages of low-skilled workers slightly, according to the same labor force study, it had no negative effect on the employment rate. Economists suggest that the new law will allow skilled Venezuelans, such as teachers and engineers, to enter the Colombian job market that they were previously excluded from, as well as lower barriers for those who wish to start businesses.

The net economic impact of the migration has already been positive, and that trend is only likely to increase in the future as migrants move away from the informal job market.

Rumors of secure borders being necessary for security were similarly unfounded. Immigrants in both the United States and Colombia are less likely to commit crimes than natural-born citizens. In fact, their illegal status leaves them more vulnerable. Worldwide, migrants are more likely to be the victims of crime, and are less likely to report those crimes to the police.

“The U.S system leaves illegal immigrants living in fear,” Adam Solow, an immigration lawyer in Philadelphia told Reason by phone. “It’s effect is to create a second class citizenry who live in the shadows and can be exploited for their labor.”

For Hernandez, Colombia’s new law is a godsend. He now plans on sending for his wife and daughters, in addition to seeking a better job. “I haven’t only been exiled from [the] country,” he says. “I’ve been exiled from my family.”

In Colombia, at least, that second part is no longer true. The U.S should learn from Colombia’s experience that migration is not a threat to the nation, either economically or existentially, but rather an opportunity to invest in the country’s future. Humane immigration policy isn’t only the morally correct course of action, it is in our best interests.

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Rapp v. Fowler is a sexual assault case against Kevin Spacey (whose legal name is Kevin Spacey Fowler), “aris[ing] out of alleged sexual misconduct involving the two then minor plaintiffs 34 and 40 years ago.” One of the plaintiffs is Anthony Rapp, but the other wants to proceed pseudonymously as C.D. Should he be allowed to do so?

Pseudonymity is a rare exception in American court cases (especially in federal court), though it sometimes is allowed when sexual assault claims are involved. Here is an excerpt from C.D.’s argument for pseudonymity:

C.D. feels extreme anxiety and psychological distress at even the thought of being required to proceed publicly in this action. As a result, C.D. has reluctantly decided that in the event the Court denies his motion to proceed anonymously, he is emotionally unable to proceed with the action and will discontinue his claims…. Indeed, denial of the motion [would force] C.D. into a Hobson’s choice—reveal to the world forever the traumatic events suffered as a minor at the hands of Kevin Spacey or abandon his efforts to seek justice for these egregiously wrong acts.

And here’s one from Fowler’s argument against pseudonymity:

Mr. Fowler categorically denies C.D.’s claims. They are simply untrue. But he is skeptical C.D. will walk away from claims for which he asserted just weeks ago he is seeking $40 million in damages. And if C.D. chooses to dismiss his claims because this Court follows the law and facts in denying the Motion, then that is no one’s decision but his….

Mr. Fowler has not sought and does not seek special treatment. He simply wants C.D. to play by the same rules applicable to all litigants and those by which Mr. Fowler was  forced to abide when C.D. levied his public accusations against him.

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Texas Gov. Greg Abbott yesterday announced that he plans to lift his state’s remaining COVID-19 restrictions as of next Wednesday. The decision predictably provoked much criticism from Democrats, who argue that the Republican governor is inviting a surge in cases and deaths by acting precipitously.

“What Abbott is doing is extraordinarily dangerous,” said Gilberto Hinojosa, chairman of the Texas Democratic Party. “This will kill Texans. Our country’s infectious-disease specialists have warned that we should not put our guard down, even as we make progress towards vaccinations. Abbott doesn’t care.” There are several reasons to be skeptical of such warnings, starting with the details of what will actually change as a result of Abbott’s new order.

Most businesses in Texas have been allowed to operate at 75 percent of capacity since October 14, when Abbott also allowed bars to reopen. As of March 10, the occupancy limit will be removed. It seems unlikely that such a change will have much of an impact on the risk of virus transmission, even in businesses that were frequently hitting the 75 percent limit.

In counties with “high hospitalizations,” meaning that COVID-19 patients account for more than 15 percent of hospital capacity, local officials will be allowed to enforce occupancy limits on businesses, provided the cap is no lower than 50 percent. That is the limit Abbott had been imposing in such counties since mid-October.

Abbott is also lifting the state’s face mask requirement, which he imposed on July 2. While “individuals are strongly encouraged to wear face coverings over the nose and
mouth wherever it is not feasible to maintain six feet of social distancing from
another person not in the same household,” he says, “no person may be required by
any jurisdiction to wear or to mandate the wearing of a face covering.”

Businesses are still free to require face masks on their property. Their decisions will depend on how they weigh the fears of people who are keen to avoid infection against the resentment of people who don’t want to cover their faces. Reuters reports that Target and Macy’s, for example, will continue to require that their employees and customers in Texas wear face masks. Toyota and General Motors likewise said their policies will remain unchanged.

The Texas grocery store chain H-E-B, by contrast, says it will urge, but not require, customers to wear masks. Its employees will still have to wear masks. “Although there is no longer a statewide mask order, H-E-B believes it is important that masks be worn in public spaces until more Texans and our Partners have access to the Covid-19 vaccine,” the company said in a press release. The Randalls supermarket chain is likewise lifting its face mask requirement for customers, although it said “we will continue our health and safety measures such as enhanced cleaning and social distancing guidance.” The Kroger chain has not updated its policy yet but plans to do so.

The impact of eliminating the state requirement and any changes to business policies, of course, will depend on how many Texans prefer not to wear masks in public places. According to the latest University of Texas/Texas Tribune survey, “88% of the state’s voters”—including 98 percent of Democrats and 81 percent of Republicans—”wear masks when they’re in close contact with people outside of their households.”

Abbott’s critics note that Texas lags behind other states in vaccinating its population. But according to a New York Times tally, 13 percent of Texans have received at least one dose, which is about the same as the share of residents who are 65 or older. Vaccines are currently available to Texans in that age group, along with people who have certain preexisting health conditions that increase the danger posed by COVID-19.

Older people face a much higher risk of dying from COVID-19: According to estimates from the Centers for Disease Control and Prevention, the infection fatality rate for Americans older than 70 is something like 5.4 percent, compared to 0.5 percent for 50-to-69-year-olds, 0.02 percent for 20-to-49-year-olds, and 0.003 percent for people younger than 20. The fact that Texas already has distributed enough vaccines to cover most people who are 65 or older should substantially reduce any risk of additional deaths stemming from less use of face masks.

Texans in high-risk groups who have not yet been vaccinated would be well-advised to continue avoiding close interaction with people from other households, especially if those people are not wearing masks. At most, Abbott’s new policy might make that precaution marginally more difficult.

The same people who are predicting dire consequences from these changes also objected when Abbott lifted his statewide lockdown at the end of April. Yet newly identified cases in Texas did not start rising until mid-June. And while the state’s summer surge was bigger than the one seen in California, which has much stricter COVID-19 policies, the winter surge was steeper in California. The two states have seen similar declines in daily new cases since early-to-mid January, despite their starkly different approaches to the pandemic.

In Florida, the Times notes, “schools and businesses have been widely open for months.” Yet Florida also saw a sharp decline in newly identified infections around the same time that Texas and California did, as did the United States as a whole.

Some epidemiologists think that drop reflects the waning impact of infections associated with holiday gatherings, extra caution inspired by the winter surge, or some combination of the two. Marty Makary, a professor at the Johns Hopkins School of Medicine and Bloomberg School of Public Health, argues that we can thank increasingly wide natural immunity, including T-cell responses that are not detected by antibody tests.

Whichever interpretation you favor, variations in public policy do not seem to be an important part of the story. That is apt to be especially true when we are talking about relatively modest differences, such as changing the occupancy limit for businesses from 75 percent to 100 percent of capacity or telling people they are not legally required to wear masks when the vast majority of them think that precaution is sensible.

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While the Democratic Party pulled off a complete (albeit narrow) victory over Donald Trump and the Republican Party in 2020, they lost ground with nonwhite voters—despite significantly raising the salience of racial justice issues during the campaign.

According to progressive pollster David Shor, it’s time to face the facts: The cultural views of very highly-educated, very left-leaning white people are toxic for many nonwhite voters who would otherwise support the Democratic Party.

“I don’t think a lot of people expected Donald Trump’s GOP to have a much more diverse support base than Mitt Romney’s did in 2012,” Shor told New York magazine in a recent interview. “But that’s what happened.”

Shor pointed to two specific associations—socialism and the “defund the police” movement—that appear to have tarnished the Democratic Party in the eyes of minority voters. The former is an unsurprising finding, and something I’ve written on previously: Socialism is generally not popular with Hispanic voters, who associate it with the kind of political oppression experienced by people in Venezuela and Cuba.

But the latter is also noteworthy, given that “defund the police” is a mantra recited by progressive activists who purport to represent the wishes of racial minorities. These activists claim, for instance, that the role of police in society is to defend or legitimize America’s white supremacist culture. In other words, activists want to defund the police because they think doing so is a necessary component of antiracist organizing.

The trouble is that many racial minorities don’t actually share that view.

“We raised the salience of an ideologically charged issue that millions of nonwhite voters disagreed with us on,” said Shor. “And then, as a result, these conservative Hispanic voters who’d been voting for us despite their ideological inclinations started voting more like conservative whites.”

Importantly, this holds true for the highly specific way that elite white liberals talk about race in general. Shor again:

In liberal circles, racism has been defined in highly ideological terms. And this theoretical perspective on what racism means and the nature of racial inequality have become a big part of the group identity of college-educated Democrats, white and nonwhite. But it’s not necessarily how most nonwhite, working-class people understand racism. …

If you look at the concrete questions, white liberals are to the left of Hispanic Democrats, but also of Black Democrats, on defunding the police and those ideological questions about the source of racial inequity.

It seems fairly clear, based on Shor’s polling, that Ivy League–educated white liberals’ messaging on an assortment of issues falling under a category I have termed “woke excess” ended up driving minority voters into the arms of Trump. This wasn’t enough to give Trump a second term, but it probably helped the Republicans dramatically improve their position in the House of Representatives.

Woke excess goes by many names, including “political correctness run amok,” which I previously claimed was a non-trivial explanation for Trump’s surprise win in 2016. (It also drives “cancel culture,” which is currently the thing that Republicans seem most interested in symbolically fighting.) Several smart thinkers, including McGill University’s Jacob Levy, disagreed with my argument that the backlash against political correctness was significant; I was “mapping my list of excesses onto the voting behavior of 80,000 very-low-information voters in three states,” according to Levy.

Four years later, the thesis that highly educated white liberals are sabotaging the Democratic Party and inadvertently helping Trump seems, if anything, better supported than it was previously: Woke excess doesn’t just turn off non-college whites, but it also prompts some Hispanic and black voters to defect from the Democratic coalition.

In a post for Slow Boring on how Democrats can win more elections, Matthew Yglesias offers some concrete suggestions for the party’s candidates:

• Say you think it’s dumb that they are putting warning labels on old TV shows like the muppets. Just let people watch stuff.
• Say you don’t think it’s fair to call people racist when they worry about crime or illegal immigration — these are things lots of folks worry about, and the government owes them solutions.
• Especially if you are Vice President Kamala Harris, a former elected official from San Francisco, say that canceling Abraham Lincoln while keeping the city’s schools closed is the kind of dumb shit that makes people think Democrats can’t govern, and you’re mad about it.

I would add that Democratic candidates should fire any staffer who advised them to use the word “Latinx.” That this term, which only about 2 percent of Hispanics actually like and use, has rapidly taken hold in mainstream media, is a powerful example of how campus culture has quickly come to dominate elite institutions, contrary to the wishes of actual minorities.

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One of my favorite songs is One Note Samba (1960), with music by Antonio Carlos Jobim, Portuguese lyrics by Newton Mendonça, English translation by Jon Hendricks. Here’s an instrumental version, and below you’ll find a version (1962) with Herbie Mann playing the flute and Jobim singing the English lyrics.

Recently, I thought: Wouldn’t it be nice if there were a Russian version? Actually, there is a Russian version, by Aleksei Ivashchenko. You can find the words here, and you can see a performance here. That song is perfectly fine, but (much like the Russian translation of the famous Polish tango To ostatnia niedziela) it isn’t really a translation; it’s a song about how awesome this one note is, but it omits the whole love-song aspect of the original (where You are my One Note). Accordingly, I present my alternate translation of this samba, which you’re free to go out there and sing:

Эту маленькую самбу
Одной нотой напишу
Эта нота будет корнем
Тех других, что я спою

Эта новая — последствие
Той, которая была
Точно так, как я — неизбежное
Последствие тебя

Сколько здесь людей всё говорят и говорят
И всё ничтожно, почти ничтожно
Я пропел всю гамму мне известную
И всё ещё ничтожно, почти ничтожно

И я вернулся к первой ноте
Как всегда вернусь к тебе
И волью я в эту ноту
Всё, что чувствую к тебе

Кто все ноты распевает
До ре ми и гамму всю
Ничего не получает
Лучше ноту пой свою

Comments and suggestions welcome. (I know what you’re thinking: why rhyme “к тебе” with “к тебе”? But note the English rhyme “to you”/”for you” and the Portuguese rhyme “pra você”/”de você”.)

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