In the latest in a series of video interviews on lessons from the COVID-19 pandemic, Brink Lindsey speaks with Alex Tabarrok, an economist at George Mason University and blogger at Marginal Revolution. They discuss how deep-seated risk aversion and bureaucratic rigidity at the FDA cost lives during the pandemic. And yet the FDA was able to go against the grain of its institutional culture to improvise during Operation Warp Speed. Tabarrok argues that Operation Warp Speed embodied the traditional American model of solving big problems through public-private cooperation. However, it almost didn’t happen, and its approach was badly under-utilized because that traditional American model is no longer widely understood.
Brink Lindsey: Hello. My name is Brink Lindsey, I’m a vice president at the Niskanen Center. Welcome to the latest in a series of video interviews on lessons from the COVID-19 pandemic. This is all part of the Niskanen Center’s project on rebuilding American state capacity. Our guest today is Alex Tabarrok, who’s an economist at George Mason University, half of the blogging duo at Marginal Revolution, a long running and widely read and widely acclaimed economics blog, author of several great books – Innovation Nation is one of my favorites – and one of those very few people who was outspoken and right about one thing after another during this dreadful pandemic experience. Someone who’s coming from outside of the public health establishment but whose analysis and recommendations were regularly and dramatically superior to what the institutions that host all the relevant expertise were able to master.
So there’s a number of people like you that. And part of what I want to explore in our conversation today is how do we get people like that in places of decision making authority, people who can see clearly through the fog of massive uncertainty or at least operate effectively in judging risks under conditions of uncertainty and rapidly changing information. My last interview was with Scott Gottlieb, who wrote an excellent book about the pandemic called Uncontrolled Spread. Our focus there was on things that went wrong with the CDC. He is a former FDA commissioner, so we didn’t spend as much time delving into the shortcomings of FDA’s response. But Alex, you’ve been a long-time, unsparing critic of the FDA. And a lot of your criticisms of chronic overcaution by the FDA were visible in spades during the pandemic. So first just give me a little background about your history with analysis of the FDA and the continuities between what you’ve seen for years and what you saw over the past couple of years.
Alex Tabarrok: So I’ve been a long time, as you said, critic of the FDA and really also of just the public. Because it’s not just the FDA’s fault, I think it’s partly there’s an issue that when the FDA makes a bad mistake and they approve a bad drug, then that’s very obvious to people, people die, people get sick, the drug doesn’t work, everyone knows the FDA has made a mistake. On the other hand, when the FDA slows a drug, delays it or just makes it so expensive to produce new drugs, that the new drug isn’t produced at all, it just doesn’t exist then people die. People die because they don’t have access to this drug which could save lives. But that error is invisible, that error is difficult to see, you don’t see the people who died because the drug wasn’t available. So I’ve said that the people who die because the FDA is too slow, they end up being buried in an invisible graveyard. Economists are good at seeing the invisible hand, sometimes we’re also good at seeing the invisible graveyard. So some of this, I think, also clearly applied during the COVID pandemic.
Brink Lindsey: And it’s a real problem the FDA faces because public reaction is so asymmetric. They’re not just being irrational to take cues from the political world. Their continued existence, their continued independence depends upon ongoing political support. If they let a drug out into the wild that blows up in their faces, that could harm their ability to effectively regulate for years and decades to come. So it is a loaded problem. And yet there are drug regulators around the world in other rich countries with high standards that don’t seem to be quite as stuck in the mud as the FDA. They’re facing similar problems but they seem to be able to surmount them a little bit better.
Alex Tabarrok: Sometimes, I think it goes back and forth. It definitely used to be the case that the EU was a little bit ahead of the FDA. However, since PDUFA, which is the Prescription Drug User Fee Act, that actually did quite a bit of good in that. Ordinarily, it’s not something I would like because what happens under PDUFA is that the drug companies pay a special tax. And that tax is earmarked to pay for FDA drug reviewers. So at one point, we had this incredibly ridiculous, insane situation where the drugs were not being reviewed fast enough, not simply because the FDA was slow or wanted to delay drugs, they just didn’t have the staff. And meanwhile, the drug companies are losing millions of dollars because the FDA is slow.
So there was an opportunity there because that was Congress’s fault. Even though approving drugs is an incredibly valuable activity, Congress was underfunding the FDA. So PDUFA made this Pareto optimal deal possible in which the pharmaceutical manufacturers paid for FDA reviewers. Now, as I said, ordinarily, I would I don’t like this he who pays the piper picks the tune, and it does raise issues of bias and so forth. But in this case, the way it’s worked out is that two wrongs have made a right and that things are speeded up. So I think the FDA is probably no worse than some of the other regulatory agencies around the world today.
Brink Lindsey: But your big picture critique, if I recall correctly, is if there’s one gigantic reform that could be a game changer, it would be to move from the current safety and effectiveness regulation to just straight-up safety regulation and leave the rest to like we do with a whole lot of the way drugs are actually used off label, even they never were found effective for that. So in your closer to ideal world, in your marginal step to a much better world, that would be the big change in FDA regulation that you’d like to see?
Alex Tabarrok: That would be a huge change. And yes, that’s exactly right. People ask me, “Well, what would the world look like if we had less FDA regulation like you’re talking about, a lot less? And I say, “Well, look at the off-label world.” So right now today, many of the leading treatments for cancer, for AIDS, for heart disease, they are drugs which were never approved for that use. So we have this thing in the United States where once a drug has been approved for some use, it can be prescribed by physicians for any use, off-label uses. And it turns out to be the case that we discover new uses for old drugs all the time. This is not uncommon even for quite different. A drug could be approved to treat foot fungus and it turns out to be great at treating cancer.
Brink Lindsey: We’re finding that now with COVID treatments with fluvoxamine.
Alex Tabarrok: Absolutely. So yeah, fluvoxamine was approved for treating depression and it looks like it’s also good for treating COVID. Dexamethasone was approved for, I think it’s… I’ve actually forgot. In any case, yeah, you’re exactly right. And that’s one of the reasons why the medical system moves much more quickly than does the FDA. So that’s an incredible benefit when you don’t have to wait for a new drug to go through the entire FDA process. If you can find an old drug, an already approved drug, you’re free to start prescribing it right away. The off-label system makes it much easier for medical progress to happen quickly without the FDA binding it. So I do think that we actually have a picture of a world which would be like just having the FDA do safety tests or do much fewer tests basically or have much fewer hurdles to get over. It certainly wouldn’t be a perfect world, but it’s also not as dissimilar as you might imagine because the off-label prescribing gives us that perspective.
Brink Lindsey: It’s less radical than it sounds given our heavy reliance on off-label usage. Well, let’s dive into the sins of the FDA during the pandemic. And let’s start with testing, which is where the US response fell apart at the starting gate.
Alex Tabarrok: So let say this one thing first and then we’ll get into testing. And that is Scott Gottlieb is correct that the CDC, that was where the major, major failures occurred. So you’ve already got Scott so I won’t go into the details. They botched their initial test, they didn’t allow private companies to do testing, they didn’t help the private companies. Look, the only way that mass testing was going to be possible is if the major private testing firms got involved, and the CDC just didn’t help them at all. It didn’t provide samples, it didn’t provide testing, it asserted its patent rights, it was unbelievable ridiculous. So that’s one point. Second point is that I do have to credit the FDA, well, I’m sure we’ll get into this more. But with Operation Warp Speed, the FDA really did break the rules. They allowed phase one and phase two and phase three testing to occur simultaneously, they sped things up a lot. So I have to give Peter Marks credit, I have to give the FDA credit on Operation Warp Speed, which I imagine we’ll come to.
Brink Lindsey: Sure, absolutely.
Alex Tabarrok: Now to get to your question about testing.
Brink Lindsey: So on testing, first they asserted some regulatory authority over testing in the early days with public health labs, that was legally controversial.
Alex Tabarrok: Exactly.
Brink Lindsey: That happened for just a while, but it’s on the rapid testing that we had inexplicable delays. Rapid tests, home tests were ubiquitous in Europe and Asia months before they were in the United States. What was going on?
Alex Tabarrok: So I think it’s not actually inexplicable because the FDA has a long, long history of just hating people testing themselves. So the FDA was against pregnancy tests, they didn’t like that, they said women they need to consult with a doctor, only the physician can do the test because literally women could become hysterical if they were pregnant or if they weren’t pregnant, this was a safety issue. There was no question that the test itself was safe or worked. Instead what the FDA said, “We can regulate this because the user using it, this could create safety issues because they could commit suicide or they could do something crazy.” So they totally expanded the meaning of safety from is the test safe to can somebody be trusted to use a pregnancy test?
Then we had exactly the same thing with AIDS testing. So we delayed personal at-home tests for AIDS for literally 25 years. 25 years these tests were unavailable because the FDA again said, “Well, they’re dangerous.” And why are they dangerous? “Well, we don’t know what people will do with this knowledge about their own bodies.” Now, of course, you can get an HIV test from Amazon and the world hasn’t collapsed. They did the same thing with genetic tests from companies like 23andMe. So I said, “Our bodies ourselves, our DNA ourselves.” That people have a right to know about the functioning of their own bodies. This to me is a very clear violation of the Constitutions on multiple respects. It just stuns me, it just stuns me that anybody could think that you don’t have a right to know, we’re going to prevent you from learning something about the operation of your own body.
Again, the issue here was never does the test work. In fact, the labs which produce these tests, those labs are regulated outside of the FDA. So whether the test actually works, whether yes, it identifies this gene, all issues of that nature, what is the sensitivity and the specificity, are the tests produced in a proper laboratory, I don’t have a lot of problem with that because that’s all something which the consumers themselves would want. What I do have a problem with is then the FDA saying, “No, you can’t have access to this test because we don’t know what you’re going to do about it, what you’re going to think about it.” And that to me is outrageous.
Brink Lindsey: I knew that it was contrary to the FDA mindset to think that at home testing was a good idea. I hadn’t really focused on how many instances of this opposition to at-home testing there were. So I was trying to look on the bright side and think, well, maybe this is a big cultural breakthrough for them and maybe they’re in a different place now than they were at the beginning. But it could be the next thing that comes along they’re just still going to have this same paternalistic attitude, or do you think that perhaps some intellectual progress has been made?
Alex Tabarrok: I do think some intellectual progress has been made among the public and among the secondhand dealers in ideas, the journalists and people of that nature. It has been stunning to me to see in recent years how people like Ezra Klein at the New York Times and David Leonhardt and others have become very anti-FDA. So Tabarrok has been pushed to the mean. The Overton window on this issue has expanded dramatically, and to their credit. I’m definitely crediting Ezra Klein and Leonhardt and people like that. Now you see in the New York times articles which could have been written by Alex Tabarrok denouncing the FDA for being slow on testing.
See, one difference was, it’s sad to say, but for people who have cancer or heart disease or something like that, every day is an emergency, every day. And I think what COVID brought home is that everyone felt that way. So for the first time everyone was in the same boat and understood what the meaning of slowing the vaccines or speeding them up was or what the costs were. People saw for the very first time perhaps, in large numbers all together collectively, we saw collectively what it meant to delay testing. And we could look, we had an example of looking to Europe where they had approved 40 tests before we had approved two or three. And we could ask, “Well, why is this okay for Europeans to have these tests but not for Americans?” It seemed very peculiar that other countries should be in advance of us. So I think for the first time a lot of people began to see the invisible graveyard. And the question is, will the spectacles stay on after the crisis or will people again forget about the invisible graveyard?
Brink Lindsey: So moving from tests to vaccines, let’s put aside the actual development of the vaccines where the FDA along with other participants in Operational Warp Speed really did develop a new set of rules for this emergent circumstance, and to their great credit accomplished the miraculous. But then, okay, you’ve got the drugs, you’ve developed them, they’re ready to go. On the actual vaccine approval, there was this reticence again with AstraZeneca, with the weird Johnson & Johnson pause. So even things as silly as the weeks that intervened between the request for the emergency use authorization and the meeting with the FDA, it felt like submitting that request should have triggered 24/7 or around-the-clock action — the busiest most hectic, most stressful days in FDA history – it just should be war mode and it didn’t feel like that.
And it felt like once we got a couple of vaccines approved that were the most glamorous mRNA types, it felt like all the pressure went off to do anything else for the other vaccines. And yet this was all occurring in the teeth of one of the most lethal phases of the pandemic. And so every day back then there was a 9/11 death toll. So looking back at that experience, how do you grade the FDA? They moved swiftly to get through Operation Warp Speed, but then it seemed like they reverted to type once the process kicked to the approval stage.
Alex Tabarrok: So what I usually say about this is the FDA was much, much better than they usually are. So you can take that on several different levels. But no, what you say is absolutely true. It was aggravating to see the weeks in between the submission and just having the meeting to set up the meeting. Everyone knew the data was coming. There was really no reason for that. And the peculiar nationalism, I think as you said, because of Operation Warp Speed, we’d made deals with Pfizer and Moderna, was very much the American vaccine. And we did not approve, still have not approved the AstraZeneca vaccine, which is ridiculous. Everything you said I agree with entirely, the bizarre J&J pause, the earlier AstraZeneca pause. We made mistakes along the line as well, which arguable, we delayed the Moderna trials a little bit, a few weeks to get more diversity. Whether that was entirely necessary, I don’t know, that’s debatable.
But there’s a lot of areas in which we could have shaved weeks off. And it turns out that matters. And the biggest one I think was this: there was a plan, Deborah Birx in particular pushed to release the vaccines on a compassionate use basis. So compassionate use is even before an emergency use authorization. So even before all of the trials are done, we could have released the vaccines. We had millions. So Moderna had stored up already millions of doses of vaccines which were just sitting the. So the vaccines, a lot of people know the vaccines were scientifically designed within a couple of days. Within a couple of months, Moderna had started to produce them, they were stored up. We had millions of vaccines on ice and we could have, for example, vaccinated the nursing homes on a compassionate use basis.
The nursing homes, as you know, were where a huge percentage of the deaths occurred before the vaccines were approved. We’re talking about like 30 percent of all the deaths were happening in the nursing homes. And there was that huge run-up in November and December of that first year. So if we had vaccinated the nursing homes, which is not a lot of people, it’s about a million people, calculations that I have done suggest that if we moved like 10 weeks earlier on a compassionate use basis, we could have saved 40,000 lives. Had we moved even just five weeks earlier, which might have been possible by trimming a few of these mistakes, we could have saved about 14,000 lives. So I think it’s really quite difficult to argue that the benefits of delay were worth those 14,000 lives or in the case of not using the compassionate exemption, where we could have saved 40,000 lives.
Brink Lindsey: That’s a story I don’t know. Birx was pushing for that but it didn’t get through.
Alex Tabarrok: Correct, it’s not known at all. But it was on the table. So that was something I was certainly in favor of. We had good information that the vaccines were really safe early on. You had data from phase one and phase two trials, phase three trials were running. So we had some information about safety. So I think for people at high risk, it would have been perfectly rational, quite reasonable to take a vaccine, even one where you hadn’t finished all of the trials. I think that would have been reasonable and people should have had that option, especially for those in these very high-risk situations.
Brink Lindsey: What about the time between the emergency use authorization and full approval? For Pfizer, it was like eight or nine months. So the drug’s out there but that the lack of full approval became an issue in vaccine hesitancy and in just the mechanics of mandating it for the armed forces and things like that. So the vaccines might have gotten into arms a lot faster but for what seemed like a fairly leisurely time between the EUA and full approval. Now, I understand there are things in full approval that are like, well, how does the vaccine hold up under changes in temperature and over time. So there really is some time that has to take place. But the fact is this thing was just going in millions of arms and there were really no side effects to speak of. And the lack of full approval was holding up distribution.
Alex Tabarrok: Maybe.
Brink Lindsey: So what do you think of that?
Alex Tabarrok: Personally, I don’t put that one so much of the footsteps at the FDA. I think there was just a lot of irrationality and just terrible thinking among the public. So my view is that the emergency use authorization was enough for anybody who is really thinking these things through clearly. Unfortunately, we had a huge amount of misinformation, a huge amount of fear, and that’s unfortunate. But I think it was mostly due to the public themselves. I thought that there would be some vaccine hesitancy, of course, that wasn’t too surprising. But given the death rate from the virus and given the fact that these vaccines were being used quite quickly all over the world, millions of people had taken these vaccines, people should have been rushing to get vaccinated as I was at the beginning.
I think a lot of us and our friends were on Google and Facebook looking around for that one store or pharmacy which had a few shots left and trying to get us and our loved ones vaccinated as quickly as possible. And yet a lot of people, even elderly people, even people with comorbidities, they did not take advantage of the emergency use authorization as much as they should. And that has been just a terrible, terrible tragedy. It’s just been awful how many people have died completely unnecessarily after the vaccines were approved because they didn’t get vaccinated. At some point I think I don’t want to say I wash my hands of that because I still try. I’d like to see nasal vaccines to alleviate some of the fear of getting a needle. And I do think we can do more to reduce vaccine hesitancy. But all the information is out there, so I don’t put that at the foot of the FDA.
Brink Lindsey: In learning about and thinking through the pandemic experience, looking through the lens of state capacity, I find myself dividing failures into state capacity problems and civilizational rot problems. And there was a lot in the vaccine distribution that’s deeper, that we lack the political culture to sustain a capable state.
Alex Tabarrok: It really says a lot negative about the United States, the lack of trust. And do think that’s an issue which is very broad. It’s affecting our politics in all kinds of ways and not in a generally libertarian direction, unfortunately. But this just distrust of experts, some of which is justified. But this distrust of elites, this generalized distrust of our fellow Americans I think is a very dangerous trend.
Brink Lindsey: I’m as you know living in Thailand right now. Which as a country, I’ve known well for a long, long time and have generally thought of as… I used to describe it as a country whose politics are even more screwed up than my own. But in this particular episode, they’ve outperformed us in a number of key metrics. And so when we moved here in August of 2021, they had a late start on the vaccines, as a lot of less developed countries did. So when I got here in August, they only had 5 percent of the country with two shots, and the US was at 50 percnet by then. But by the first week of December, Thailand overtook the United States and is now comfortably ahead in both two shots and boosters. So no vaccine hesitancy here.
Alex Tabarrok: I used to think that there was such a thing as development economics, that there was us and them and these countries, India, Thailand the Congo, whatever and that there was this thing, this development economics, where they had to deal with these problems that we didn’t. The lesson I think of the COVID pandemic is there is no such thing as development economics. We have just as many crazy people as any other country. In India their people are taking cow urine to treat COVID and here we’re taking horse dewormer, so it’s not that big a difference.
Brink Lindsey: So there were a number of other instances or issues having to do with vaccine distribution, where you pushed for more aggressive, more improvisational approaches to speed things up and to produce the fastest, most effective response. I’m thinking of delayed second dosing in the initial days when the supplies were constrained, partial dosing likewise to get over the early days of constrained supply. You were a champion of human challenge trials to speed up the clinical trials process. It turned out we had so many dead that clinical trials could proceed relatively swiftly without that, I guess. But in all of these areas, here were things where here’s this economist, he’s not running the show, but he can see clearly improvisations that would be highly cost-effective. And in some places like in the UK, they did the delayed second dosing. So some places they were able to think on the fly, but it just didn’t ever seem to work that way in the United States, apart from Operation Warp Speed was this little self-contained Camelot. But outside of that, it was just business as usual thinking.
Alex Tabarrok: You’re exactly right, the United States, I think in part because of what we were talking about earlier, this generalized distrust, has become a highly regulated, fearful area where you have to get multiple people to approve things. So we’re so afraid of corruption that we don’t let people make decisions unilaterally and that means you can’t make decisions quickly. In fact, that then feeds back into distrust because in some cases when you can’t make decisions quickly, then you just make bad decisions. So this legalist bureaucratic vetocracy is influencing our politics on multiple different levels. Not just the COVID vaccine and not just the pandemic, but think about building infrastructure.
We got so worried and for some rightful reason. There were times when in order to build subways and highways, we bulldozed some minority communities. So to overcome some of that, we said, “Well, we’re not going to trust the planners, we’re not going to trust the builders anymore.” And then the environmentalists got involved and then the historical preservation people got involved and then the rich people got involved. So we put in all of these rules and regulations which now mean that it’s incredibly difficult to build a new subway system. China and France, they’re building subway systems at a much higher rate than we are and much better systems. And our systems are costing five times as much and we’re building far fewer of them because of this vetocracy, because of this lack of trust, because we have made it easy to exercise voice in these reviews, these environmental reviews, which now take years and years and years. And it’s amazing that we are now slowing down wind farms and we’re slowing down solar farms for so-called environmental reasons.
Brink Lindsey: We’ve steered from the Scylla of Robert Moses to the Charybdis of Gulliver, right?
Alex Tabarrok: Nicely put, nicely put. Exactly.
Brink Lindsey: Of course we see it in infrastructure, we’ve just seen it in the pandemic with this by-the-book thinking, it’s hard for people to shake out of it. But we see it everywhere, everywhere the standing rules for judicial review or agency decisions are so permissive that it’s very difficult to have coherent decision-making because there is no central decision maker who then has accountability for the decisions it makes….
Alex Tabarrok: Absolutely. And what really worries me is that it’s not just government either. There was an incredible episode during the pandemic where my colleague, our friend Tyler Cowen, got together with Patrick Collison of Stripe to produce Fast Grants. And they raised millions of dollars and they funded the saliva direct test, the spit test, highly successful test. They got money to Anne Wiley, who was at the Yale School of Public Health, to produce a spit test for COVID. And she says without Fast Grants, this test would not have been produced. Now, here’s the thing which is so insane about this, is that Anne Wiley was a professor at the Yale School of Public Health and they could not get her money during a pandemic where thousands of people are dying every day. One of their own faculty members has a spit test which can save thousands of lives, it’s the School of Public Health, and they can’t fund her. So we’re relying on Tyler Cowen and Patrick Collison, complete outsiders. And then just the icing on the cake here is Yale has a $40 billion dollar endowment. So Yale has got even more money than Patrick Collison!
And yet the bureaucracy was such that Yale for whatever reasons could not do this. And that just to me tells you that the rot is really deep, and it’s not just government, it’s throughout society. Another part of this is you think about Operation Warp Speed again, look, it was not the big pharmaceutical giants which made this happen, it was BioNTech working with Pfizer, but primarily BioNTech on the vaccine itself and Moderna, which were startups. So if it weren’t for the startups, then we would have failed utterly. So all of the big behemoths which have the resources, they were not able to do this, it was the startups which made it possible.
Brink Lindsey: So this inability to improvise, inability to switch from peacetime to wartime thinking, those were clear failures, they’re understandable if regrettable. Even deeper, I feel just exasperating the failure of imagination that was so widespread that made it so that weirdo outsiders could have such gigantic impact. We got locked into this totally false dichotomy between restrictions forever and open it up and let it rip, between just living in fear of the virus or just living in denial of the virus. Whereas the alternative of let’s beat the virus, let’s use the magnificent technological and organizational resources of the United States to beat this thing, which a number of other countries with a lot fewer resources did, it just didn’t seem to occur to anybody.
And beyond the screwups with testing and so forth and then the ongoing inability to scale up mass testing so it could ever be used in an effective way to get on top of things. We could have had… Mercifully with the internet, a lot of people were able to retreat to the cloud and work from home in a way that would have been utterly impossible 10 or 20 years before. But a whole lot of people had to keep the wheels turning, had to work in person. But no Operation Warp Speed for PPE and masks and also for rapid testing. One could have imagined, okay, we’re going to have this weird intermediate normal between now and when vaccines are in everybody’s arms, but we can make it work.
The NBA made it work, they had a bubble, the NFL even more impressively made it work without a bubble. Hospitals make it work to be exposed and be around infectious diseases and people don’t get sick every day. And yet the idea that we could actually have made this work, we could have made meat packing plants and schools safe just seemed to be like, Ooh, that’s impossible, there’s no way we could do that. And contact tracing and isolation, ooh, just immediately, the most speculative civil liberties fears went up to torpedo these ideas before they could ever even get seriously considered. There was this deep fatalism that seemed so profoundly contrary to American history up until about 50 years ago.
Alex Tabarrok: No, I think you’re exactly right. What I call the American model, the American model is combining the spending power of the federal government with the ingenuity and the innovativeness and the speed of America’s incredibly sophisticated private companies. It’s getting the visible hand and the invisible hand to work together, not to regulate, not to use the Defense Production Act to do blah, blah, blah, blah, blah, to force the companies to do X, Y, and Z. But instead to get the visible hand and the invisible hand working in the same direction. We did that with Operation Warp Speed and then-
Brink Lindsey: That’s a perfect segue to Operation Warp Speed…
Alex Tabarrok: But you’re right, in the American government, there was no general understanding of the American model. So we did it in random areas, we didn’t do it for testing, why? It was because there was just, as I said, there was no general understanding of how Americans solve problems. So we got it almost randomly. Operation Warp Speed easily could not have happened. We had Robert Kadlec who was a military guy, he pushed it, Peter Marks was good, we had Jared Kushner.
Brink Lindsey: Tell a little bit more about these people and who they were and how they came together.
Alex Tabarrok: So Peter Marks was at the FDA, Kadlec was in some obscure agency, I forgot the exact details of it, Alex Azar was head of Health and Human Services. And a lot of these guys, Jared Kushner, a lot of these guys because it’s unfortunate, but Trump created this penumbra around him. Trump was so chaotic, so full of braggadocio and so unscientific and so off the cuff and just out of control, just this chaos. And then I think this penumbra which Trump created unfortunately other people became seen through that penumbra. So a lot of these people are made fun of. But Alex Azar had a fantastic career in the pharmaceutical industry and in private industry. So we were incredibly fortunate to have somebody like that at Health and Human Services.
Kadlec has this military background, so he was much more in favor of doing these things on the fly, moving quickly, and we created this private-public partnership. To understand how lucky we were, I don’t think this would’ve occurred under the Biden administration. And I don’t mean that as a political attack, Biden, I think would have been much better on many aspects of the pandemic, just calm and controlled and not so chaotic. But on this measure, for example, the federal government, they used McKesson, a huge pharmaceutical distributor, it was produced by private companies, it was delivered by FedEx and by UPS, most of the injections came at Walgreens and CVS.
So it was a very much a private-public partnership, but the private part was huge. Palantir which was Peter Thiel’s company, they played a very, very important role in getting the most sophisticated information system so that they were able to track. The moment a vaccine left the factory, it was in a climate-controlled box where the temperature was taken every two minutes, they had that delivered to the computers. They were able to track all the way through McKesson, through UPS, to CVS, all the way through to when the vaccine was injected into arms, it was a very sophisticated system. And you just can’t imagine that Biden would have done a deal with Palantir. So we got very lucky actually and there were a lot of people, particularly Gustav Perna, the general who was in charge of logistics.
So Perna knew the importance. His whole career was about getting what the military needed, getting the food, getting the gasoline. And we’ve seen how Russia has totally failed on that. So you see the importance of logistics. He was a master of logistics. We brought in Moncef Slaoui, who was one of the most successful vaccine manufacturers. He’d been on the board of Moderna, he had a long career in manufacturing vaccines. So we brought in these guys, the military guy, the private guy, and we just said, “Go do it and you’re just going to go directly to the president.” So Trump was good in this respect, Trump got them what they needed. But they did it entirely outside of the usual procedures of a government. In fact to fund Operation Warp Speed, this is amazing, but Operation Warp Speed is probably the highest benefit-to-cost project since the Manhattan Project. It was incredibly beneficial and yet it was extremely difficult to get it funded.
Congress and Pelosi wanted to slow things down, they were not in favor of getting a vaccine before Election Day, as we know. So what they had to do is, they really had to take funds from all these other programs surreptitiously, they had to lie. They say they did it legally, maybe they did, but they certainly violated the spirit of the law in order to get Operation Warp Speed funded. So my point is to get Operation Warp Speed was fantastic, but it’s very sad to see how many rules it had to violate, how it had to go outside of the usual US government procedures, and how unlikely I think it is that we are to repeat this.
Brink Lindsey: That’s a book I would really like to read. I hope somebody is writing it right now. So we had this sensational success in developing vaccines dramatically faster than we’ve ever done before, and yet it’s a global pandemic. The gearing up of capacity to produce vaccines, to produce the billions of doses that are needed to vaccinate the planet, which is ultimately what is needed to end this pandemic, that’s been very slow. Could Operation Warp Speed have affected that at the outset by having… So we gave companies money to do research, we gave advanced purchase commitments. Could we have dangled a gigantic pot of money out there to do tech transfer to all reasonable foreign manufacturing candidates, so have used the same mechanism to give of drug makers the financial incentive to rapidly expand worldwide capacity in a way that they just don’t have right now because they’re profit seeking companies and they don’t want to share the technology that’s first is going to be boosters forever and then second, technology that is going to be used for a whole bunch of other different diseases? But that could have been affected, it seems like to me, by just getting the incentives straight up front. So what’s your take on the opportunity missed for not just developing the vaccines, but for ramping up the supply with appropriate speed?
Alex Tabarrok: So working with Michael Kremer, he’s a Nobel Prize winner, I was working with this group of very top-notch economists who we were advising Operation Warp Speed early on. Michael Kremer and I spoke to the White House, Domestic Policy Council, and to the Council of Economic Advisors early on. And they asked us to write a report about what could be done to incentivize and to increase the speed at which vaccines were produced. And we reported something, in this report we advocated for something would become Operation Warp Speed. The difference being is we thought we could go or we should go much bigger actually. So we ended up spending, depending upon exactly how much you count, about $15 billion, maybe $20 billion by the end on the vaccines. We were talking about spending closer to $150 billion and worldwide even more. So Operation Warp Speed was hugely beneficial but it could have been bigger.
But I also have to say that of all the countries in the world, the United States did the best, the United States spent the most. Britain spent a little bit, a little bit in Europe, but after that, almost nothing. In fact, every single country in the world really should have been entering into advanced market commitments to buy vaccines, which would have increased the total capacity. So every other country in the world, if the United States did not do well, every other country in the world did really much, much worse, Britain and perhaps a few other countries on vaccines excepted. So we could have spent more, we could have done, I would’ve liked to see Operation Warp Speed for a nasal vaccine. I do think that quite a bit of vaccine hesitancy is actually needle hesitancy, people aren’t willing to admit that. But I think that’s true. So we could have done things like that.
On distribution, I think you’re you’re right, the companies don’t have the same incentives to do a vaccine variant for one of the variants, for example. That would require shutting down a factory and retooling it. It wouldn’t take that long a month, four weeks, six weeks, it could be done. But still that’s a lot of sales and we could use some subsidy there to encourage the vaccine companies to make variants. On the world scale, I think the world could definitely have spent more on capacity for sure. We’re at the point now, however, where a lot of the problem is distribution. Africa, a lot of the countries in Africa, for example, have recently sent back their vaccines because they just don’t have the capacity to administer them. So they said the vaccines are coming too fast, we don’t have the arms to welcome it.
Brink Lindsey: We’re in the third year now and I think Sub-Saharan Africa’s 20%, 30% vaccination rate, something like that.
Alex Tabarrok: Yeah, it’s low for reasons I think we don’t understand. The death rate in Africa also appears to be low, that could be mismeasured, it could be there’s still a variant still to come. The death rate in India was low until it wasn’t, until Delta hit and then India hit very, very badly. So I don’t think Africa is out of the woods by any means and I wish we had better distribution. I think it is mostly distribution, however. Though, like I said, we could have done better on capacity.
Brink Lindsey: We went a good 100 years between global pandemics, we have a few candidates in the 21st century already… So it’s foolish to think that this is our last rodeo. What stands out to you, if you could pull one or two or three levers magically, what would be the most important things to do to put us in a better position next time?
Alex Tabarrok: One thing which I noticed during the crisis is that amazingly there were battles over the money and that there were political battles. The Democrats didn’t want to fund things like Operation Warp Speed and so forth. But also just putting aside the politics, it was like, even though the government, it doesn’t make any sense to me, but this is how it was, the government spends trillions of dollars every year but so much of it is legally bound, earmarked, is that we have to send out the social security checks and all this.
There was never any possibility of like, well, let’s reduce the social security checks by 1% this year and devote that, it’s saving seniors from this virus which is killing them. It was inconceivable that something like that could happen. So one thing I’ve suggested, which in one sense is ridiculous but actually might work, is an emergency trust fund, let’s say $100 billion or so, which could be purely nominal in that you just fill it with government bonds. So it doesn’t actually cost you anything to do it but what that would mean is that in an emergency, there would be a clear legal authority to use this money, which nobody else could claim.
Brink Lindsey: That’s a really interesting idea because one of the really weird things about pandemic economics is just the crazy cost-benefit analysis. If you find anything that works in terms of reducing death tolls and preventing infections or treating, the benefit-to-cost ratio is just insane. So you never have to worry about doing… any amount of money you spend is going to be crazily socially beneficial. So pinching pennies about any of this stuff is just nuts.
Alex Tabarrok: Yeah, absolutely. When I first spoke to the Domestic Policy Council at the White House I said, “Look, I’m a conservative, free-market economist and look, I never said these words in my life before, but now is the time to throw money at the problem.” Because as you said, the benefit-to-cost ratio was huge because the entire economy was shut down. So the entire economy was dependent upon getting vaccines approved. And you saw this every time, there was just a little bit of good vaccine news about the clinical trials, the entire stock market jumped up.
Moderna and Pfizer of course jumped up but nowhere near the size of the increase in the market, the airline stocks jumped up the hotel stocks jumped up, the restaurant stocks jumped up, the automobile car companies jumped up. So the entire economy was dependent upon this one sector. And that’s a time when you really want to get that sector working because almost anything you do pays for itself many, many, many, many times over. And that is indeed what we have seen with the vaccines, with the approval of the vaccines, the economy, the unemployment rate came way down, the economy has done much, much better, more than paid for itself many times over.
Brink Lindsey: You don’t always know what the proverbial o-ring is in a particular social situation, but here it was clear. And once you know what the o-ring is, you pay top dollar for it.
Alex Tabarrok: And yet we were literally, well, not literally, but we were figuratively looking for coins in the couch to fund something like Operation Warp Speed.
Brink Lindsey: Well, Alex, we’ve covered a lot of turf. I think that idea for going forward is a good enough place to stop. I could pick your brain for plenty longer, but let’s wrap it up there. Alex Tabarrok, thank you so much for talking with me.
Alex Tabarrok: Thanks for speaking with me Brink. Good to see you.
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