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.
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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.
I agree that letting the price system do its job is almost certainly the right approach here, but its no guarantee it will help Irma. She may not have the resources to buy her way to the front of the line.
Rob Rawlings (#1): Of course it helps Irma. She gets paid! She’s paid either directly by Edna or by receiving, directly (e.g. via a check in the mail) or indirectly (e.g. by increased government services), her share of what Edna pays the government. Given how low she is on resources, I’m guessing she’ll quite appreciate this.
I agree that Irma is better off with the auction-type system you describe than with the entirely aged based system that the CDC may well opt for (though if she is suicidal and the only thing that will keep her alive is access to the vaccine then this level of being better off is pretty useless to her). I note also that had Irma been 3 years older she would probably be better off with the aged based rationing system (she gets the vaccine and doesn’t have to pay a premium for it). Whatever system the CDC chooses there will be winners and losers.
I do strongly agree though that letting the price system do its thing is almost certainly the optimal way of getting the vaccine to those who need it most (Maybe with subsidies available for those deemed most vulnerable. These could perhaps be age-based so that Edna would get a bigger subsidy than Irma’s, but Irma’s subsidy might be enough for her to buy a vaccine).
“Essentially everyone understands that it would be insane to try to distribute food or housing or pretty much anything else without using prices.” Holy crap, Steve needs to get out more. Frequently feels like “Essentially no one understands…” would be more accurate.
Also, for fork’s sake, “Mail (will not be published)” but hey we’ll include the picture Google associates with this e-mail address is one hell of a bait and switch.
You state: “there’s a simpler way to accomplish the same thing: Let Edna and Tina buy their way to the front of the line.” Is it not the two younger ones who want in the front of the queue as you describe this?
It is somehow fitting that the end of the pandemic may be like the start: we have problems that prices can solve and don’t let them. You can’t raise the price on the items flying off your shelves, so there are people with a few years’ supply of toilet paper and those who would pay $50 with none. There are some that are surprised that I, a person having taught at the university level for 44 years, oppose “free” college for much the same reasons.
David E. Wallin (#6): Corrected. Thank you!
What has been described is not an auction. Rather the government has, in its infinite wisdom, already chosen to “give” me a front row seat (or not). There is no efficiency of market. The only question is can I “sell” my front row seat?
In a “price system” the demand for a vaccine greatly exceeds the supply thus driving up the price such that only the wealthy (and not the front line workers) could afford the vaccine.
COVID already “targets” the poor thus COVID has been condemned as racist. If the vaccine follows free market rules then the cure will also be condemned as racist. The resultant protests will again spike COVID thus creating even more demand thus even more racism.
Maybe a lottery/raffle like power ball? Buy a number. Buy several. Spin the wheel. Some win. Some lose. Everyone contributes.
I agree with your responses to your own queries myself. Still, I wonder if the case is not quite as clear cut as you suppose.
For example, the goal of vaccination is really to get a sort of herd immunity — there is a legitimate public good/positive externality quality here. That might mean that “priority” should be assigned to some regions, perhaps even arbitrarily, regardless of whether they have Ednas, Ermas, Tinas, or Ginas.
Similarly, I would prefer that we vaccinate potential “super spreaders” than elderly shut-ins, even if they are unwilling to pay for the vaccine and potentially move up the line. Of course, the government is unlikely to distingish these people, but neither do I see the price system working much magic here.
blink: I absolutely agree with you that there are some people we want to put at the front of the line and not let them sell their places. These probably include a lot of people who are in the habit of partying without masks, if we can identify them. I still contend that most of the rest of us ought to be able to buy/sell our places, and if I read you correctly, we agree on this too.
I’m wondering if we’d still want a pure price system for a different disease with some big externalities? For example subgroup-X (in this case older people) were provably more likely to transmit (granted I don’t see a mechanism for this to actually happen, but thought experiment).
Perhaps the market resolves this by having people outside group X subsidize people in group X (say by crowdfunding). What happens if we have some subset of the population (Y) who doesn’t believe that group X is more vunerable (we do have science deniers in real life, and I’m making up implausible scenarios here). Would this change things at all?
On #2, are you confusing Irma and Edna? I thought Irma pays Edna, not the other way around! Or am I missing some economic sublety?
Either way, your name assignments are very confusing, they all have different stories but terribly similar names! Next time can we have a Dolores and a Phoebe?
“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.”
This is true, but is somewhat circular if your definition of “efficiently” is very close to “the distribution that results from the price system”.
However, a person’s morals may lead them to prefer some other distribution, which means they would prefer not to use the price system.
In particular: If a poor person’s need for a resource is objectively greater than a rich person’s, then a person’s morals might lead them to prefer giving the resource to the poor person, even though the price system would distribute the resource to the rich person and an economist would call that “efficient”.
It is funny how this pandemic causes people to want to dictate what is good or ethical for everyone else.
It is possible that, initially, most people do not want the vaccine. When 20 million doses become available, there may not be more than 20 million people willing to get the vaccine. I expect most people to say that they would rather not be guinea pigs, and prefer to wait a few months to see how the vaccine works out for everyone else. So no rationing may be needed at all.
When trying to inoculate a vast number of people, simplicity is a great benefit. All efforts can be put into distribution and the more complex the system the more problems it introduces. In this case I am in favor of just assigning priorities and getting it done as quickly as possible. Keep is simple.
Once we start selling places, we get more complexity and much more controversy. Controversy is the last thing we need. Essentially, it is not about efficiency, but speed. Efficiency is a small matter in comparison.
There is also somewhat of a different philosophy going on as well. If we wanted to follow price methods, we would not restrict anyone, everyone could make their own risk assessment and we would have many more deaths. It seems to be impossible to separate the vulnerable if the infection is wild. At least, we have not found a way, perhaps because we have not looked hard enough, but that is where we are. We have been told to restrict ourselves to protect others. That is a policy choice, many do not like it, but many stick to it anyway. Once we introduce selfish ways to avoid collective responsibility, such as paying to jump the queue, those that do not like the restrictions will have more justification for not sticking to the restrictions.
In principle, I don’t see much problem with either selling their spot, nor with the just buying your way to the front and redistributing. In practice I think on balance it would be a bad idea. The best way to help Gina and Irma is probably just get the job done as quickly and simply as possible.
This does depend on how it ends up being done, and whether distribution or supply is the limiting factor. If Gina and Irma just have to wait until the elderly are vaccinated, then I am OK with them waiting a bit longer. If they have to wait 6 months for more supplies, that would be a different situation and I might change my view.
I have not studied it, but it seems to me that there is a large overlap between those that object to the restrictions and those that are very suspicious of the vaccine. I can understand that these both come from a similar world view, but since the vaccine is the best way to get the restrictions lifted, and these people are the ones who view the restrictions as most damaging and objectionable, some pragmatism might enter into it and the trade off would be most appealing to them.
Roger comments that people want to dictate what is good or ethical for others. That is always the case. We dictate to would-be murderers that this s not ethical. The Govt has dictated to us that allowing hundreds of thousands of vulnerable people to die is not ethical. Same principle. It is how ethics works, really. We do have problems when people do not generally agree. Unfortunately, the real ethics have got lost in the politics. I don’t think most people who object to the restrictions believe that without them, hundreds of thousands will die. We end up arguing about the facts rather than arguing about which choice to make between difficult outcomes. That is a shame.
Bennett Haselton (#14):
In particular: If a poor person’s need for a resource is objectively greater than a rich person’s, then a person’s morals might lead them to prefer giving the resource to the poor person
And might that person’s morals also lead them to prohibit a mutually agreeable trade that would transfer the resource to the rich person? Because if so, I think that “morals” is not the word I’d choose to describe these principles.
This is all very Coasian. If there were transaction cost free ways to achieve the transfer, then all would be well. However, we have to deal with the real world with transaction costs, and sometimes it is not possible to arrange the efficient transfers. To maximise benefits, we should distinguish between things that should not be done by principle, and things that should not be done because we cannot arrange it properly. Ignoring transaction costs will lead us down the wrong path.
I’m not sure how well the price system would work here, because there are VERY LARGE externalities involved. In fact externalities are (or should be) a primary consideration of vaccination distribution.
In order to contain spread, we want people who have contact with a lot of other people to be vaccinated primarily, regardless of what their PERSONAL risk profile is.
I think you can make a case that in general, the more likely one is to be a super-spreader, there more likely that person is to be relatively poor, and thus would be more ready to sell the vaccination entitlement.
A young shop clerk, partying college student, teacher, waiter or nurse for example would have an extremely low acute Covid risk (though we don’t know the risk of long-haul Covid, which appears to hit a fairly large number of young people with mild or even asymptomatic acute illness quite hard).
This is a group that is at high risk of infection, relatively low risk of personal injury from an infection, but at a high risk of spreading the infection.
At the same time, this group earns very little compared to other groups that are much less involved in transmitting the virus, so it is precisely this group that we MOST want to be vaccinated that would end up selling its vaccination entitlement.
So if we want to use vaccination to slow down or end spread, a price system might be the exact opposite of what we want.
Harold (#18):
If there were transaction cost free ways to achieve the transfer, then all would be well.
But there is a transaction cost free way to achieve the transfer. If you want the vaccine early, you write a check. The checks are deposited in the federal treasury, where they finance either current tax cuts, future tax cuts, current additional spending or future additional spending, any of which benefits the population at large, including those who did not buy an early place in line. I don’t see where any of this would be terribly costly to administer.
Advo: I agree that there are significant externalities that would mean we don’t want to rely on the price system entirely. (Ideally we’d find the people who refuse to wear masks and pay them to get vaccinated first.) But there are a lot of Ednas, Irmas, Tinas and Ginas out there, on whose behalf I hope we won’t make the silly mistake of saying “the market isn’t perfect, so let’s abandon it”.
There’s another consideration – even disregarding things like high-contact professions.
Older (more mature) people and people with a higher level of executive functioning (meaning people who have their shit together and are not idiots) generally 1) have more money and 2) are going to act more cautiously in the present situation; wearing masks, maintaining contact.
On the other hand, people with executive dysfunction or just a lower level of executive functioning will have less money and will be at higher risk of contracting and spreading the virus because they’re less cautious.
In a price system, they will be incentivized to forego vaccination; the people with high executive functioning would obviously like to buy the vaccine just so they don’t have to be cautious anymore.
From this perspective, a price system could end up being less effective in preventing spread than a purely random system, because you would primarily enable high-executive function individuals to be less cautious.
On the other hand, by January, around 30% or so of the population will have already gone through the infection, including pretty much all of the more happy-go-lucky part of the population.
So maybe a price system would be really good from that perspective, because people who think they’re already immune (or at least somewhat resistant) wouldn’t waste the vaccine.
Yeah. In view of that, most likely doing some kind of price-related distribution thing would be a good idea.
#20, Touche, but I could argue with this:
“I don’t see where any of this would be terribly costly to administer.”
It seems possible for Govt to make a mess of many things, and I would not rule this out. The risk maybe small, but I still prefer the simplest approach.
I may be choosing this to avoid making that choice I said earlier – should we not do this on ideological grounds or because the costs of doing it are not worth the gains.
I am still concerned that selling places for early vaccines undermines the unity of purpose required to combat this effectively. If we have no concept of acting for the general good, then uptake of all vaccines will drop and adherence to social distncing restrictions will drop. Selling places undermines the ide that this a collective effort. It is a bit like voting. Rationally, voting is pointless, but the whole system requires us to hold a collective delusion that it is worthwhile. Shattering that delusion may be rational, but may be very damaging. Maybe it is not a delusion, but a recognition that we are part of a bigger thing that just ourselves and just have to make these contributions.
Estimates are coming in at $40 for the two shot regime. Between insurance and government aid many to most will pay zero dollars.
Adds new meaning to “Free” market?
(Biden has also announced Brown & Black First so all one has to do is sit under a sun lamp if one wants to move up in line :-)
Steve Landsburg (#17):
“And might that person’s morals also lead them to prohibit a mutually agreeable trade that would transfer the resource to the rich person?”
I think the problem (as I said in another context on a different post) is that if you create an opportunity for poor people to bargain away something like a kidney or a vaccination, that will reduce societal pressure to give aid to poor people who *don’t* want to bargain away that resource. (“Hey, why should you get welfare if you still have two kidneys?”) That may not be a problem for libertarians who oppose government aid for the poor anyway, but it’s a problem for everyone else.
(I realize this might appear inconsistent — why is it OK to “pressure” the poor to bargain away their labor, but not their kidneys? — and I can’t give you a better answer except that when it comes to people’s bodies, it just feels different, and I assume that’s why most people are opposed to selling kidneys but not labor.)
One irony is that this implies that the *underground* kidney market doesn’t cause this harm — because you get the mutually beneficial trades, without the societal pressure on the poor to sell their kidneys in order to get welfare. I think this is in fact true.
The other irony is that it implies it ought to be legal to sell your kidney if you’re not poor. I actually agree with this too — I don’t think there’s anything icky about selling your kidney if you’re upper middle class, and it won’t create pressure to cut off welfare for poor people who don’t sell theirs.
Now, how much of this applies to the COVID shots? I’ll bet you could persuade some medical ethicists that it would be OK to sell your COVID spot if you’re not poor.
If it were feasible for one person to ceed their priority to another, then it would be OK to do it for money, but I doubt it is feasible. Nor is it apparent how much better the voluntary exchange of priorities would be compared the just allowing the person with priority to forgo the vaccine, allowing it to go to someone else outside the “priority” group.
Thomas Hutcheson (#26):
If it were feasible for one person to ceed their priority to another, then it would be OK to do it for money, but I doubt it is feasible.
But the whole point is that it is feasible. That’s why we have a price system. Why do you suppose my neighbor indulged in a $400 kobe steak for dinner and I didn’t? He chose to pay for the steak; I chose to spend my money on other things. If it works for steak, why won’t it work for vaccinations?
I think the purpose of vaccinating at risk people first is to protect the health service. Old people are more likely to get seriously ill and require hospital care (or die). Allowing the price mechanism to allocate the vaccination won’t protect the health care system.
Secondly, I agree with someone else who mentioned that simplicity is key. The vaccine can’t just be distributed to people who pay, for example will they turn up and wait 3 hours in a queue? This is mass vaccination. You have to vaccinate a whole hospital, a whole care home, a whole office block, a whole university etc in one go (this is especially true of the biontech Pfizer vaccine)