Monthly Archive for December, 2020

Merry Christmas

Published
by
Steve Landsburg
on December 21, 2020
in Economics
. 27 Comments

If you’re wealthy enough to be sure you’ll never spend it all, you might be thinking — especially at this time of year — about giving away some of the excess. Unfortunately, that’s impossible.

What you can do is force some people to give to other people, and you might very well want to do that. But as for your own excess wealth, you can’t give it away, because you already have.

There are two ways to explain this. Pretty much everyone agrees that one explanation is much clearer than the other, but it seems like they’re split about evenly as to which is the clearer one. So I’ll offer both and you can take your choice.

Continue reading ‘Merry Christmas’

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How To Auction Vaccines

Published
by
Steve Landsburg
on December 10, 2020
in Current Events, Economics, Policy and Reforms
. 20 Comments

I hold this truth to be self-evident: It is downright crazy to try to distribute vaccines without using prices. I said as much last week.

The question then becomes: How should those prices be implemented?

Method I: Distribute vaccine rights randomly and let people trade them. This suffers from the fact that you can’t know how much the vaccine is really worth to the people you’re bargaining with, which is a barrier to efficient bargaining.

My immediate instinct (which I still think is a pretty good one) is (after pre-vaccinating certain key groups like first responders and health care workers) to give everyone a choice: You can have your vaccine now, or you can have a check for (say) $500 and your vaccine in six months. This suffers from the need to get the price right (presumably involving some trial and error) but I stand by it as far far better than the Soviet-style central planning we’re about to actually get.

But now Romans Pancs has done far better than I have, by actually thinking about the details of the optimal auction design and getting them right. His paper is here. (You’ll need to sign up for a free account before downloading.) Anyone who actually cares about getting vaccines distributed efficiently should start by reading this paper.

Click here to comment or read others’ comments.

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Priority Care

Published
by
Steve Landsburg
on December 2, 2020
in Current Events, Economics and Policy
. 28 Comments

Here is a scenario not unlike many that could well play out in the near future, courtesy of our friends at the Centers for Disease Control:

  • Edna, age 65 and retired, lives alone and likes it. She gets along well with her neighbors but prefers not to socialize much. She’s entirely comfortable with her Kindle, her Netflix, and her Zoom account, which she uses to keep in touch with her family. She does look forward to the day when she can hug them again, but for the time being, she’s wistfully content.
  • Irma, age 62 and retired, lives alone but mostly lives to dance. In normal times, she’s out dancing five nights a week, and out with friends most afternoons. Confined to her apartment, she’s feeling near suicidal.
  • Tina, age 65 and a corporate CEO, has discovered, somewhat to her surprise, that she can do her job via Zoom as well as she can do it from her office. It took a little getting used to, but with all the time she saves commuting, she’s actually able to work more effectively, and everything’s humming along just as it should.
  • Gina, age 58 and also a corporate CEO, has a very different management style. She’s accustomed to popping into her managers’ offices unannounced at all times of day to keep tabs on what’s going on, and she’s found that this way of working is extremely effective for
    her. Since the pandemic started, she’s lost her grip and the corporation is foundering.

Now: A vaccine becomes available. The CDC decides that people over 65 will be near the front of the line to receive it.

Question 1: Should Edna be allowed to sell her place in line to Irma? Should Tina be allowed to sell her place to Gina?

Question 2: Do you think the CDC will allow that?

I am quite sure that the answer to Question 1 is yes, and nearly as sure that the answer to Question 2 is no. Which means something is wrong.

It is tragic that so much of pandemic-management policy has been made in defiance of basic science. It is equally tragic that so much policy is about to be made in defiance of basic economics. Because if there’s one thing that economics teaches us, it’s that you cannot distribute a scarce resource efficiently unless you use the price system. No bureaucrat at the CDC has enough information to distinguish Edna from Irma, or Tina from Gina. Therefore they won’t even try.

Essentially everyone understands that it would be insane to try to distribute food or housing or pretty much anything else without using prices. But when it comes to Covid vaccines, the reasoning seems to be that vaccine distribution is uniquely important, so we should do a uniquely bad job of it. Go figure.

If you think it would be a nightmare for all the Edna/Irma and Tina/Gina pairs to negotiate individual contracts, there’s a simpler way to accomplish the same thing: Let Irma and Gina buy their way to the front of the line, then take all the money you collect and redistribute it to the population as a whole so that Edna and Tina get their shares. In other words, let the price system do its job.

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