Economics staff at Bristol University give their views on recent economics hot-topics. Where does the expert consensus lie?
By Ethan Lester
For this month’s survey of expert opinion at Bristol University’s School of Economics, I ask three questions related to the ongoing COVID-19 pandemic response. Firstly, I ask if governments should cooperate to waive vaccine patents and licenses, so that (particularly developing) countries might be able to vaccinate their populations faster. The figure below shows how governments disagree over this question, but I want to know what the economists think:
Secondly, I ask if the historic $2.2 trillion stimulus package which was passed by Congress in March will cause inflationary pressures for the US economy. Thirdly, I ask if it would be appropriate to emulate the ‘lottery’ scheme Ohio has introduced to encourage vaccine uptake. The format of this blog is inspired by the IGM panel of leading academic economists from the world’s top universities. The three questions will be answered on a scale of agreement (a ‘likert scale’), with the option to add a comment.
Question 1: ‘Patents over the production of the COVID-19 vaccine should be waived’. Do you agree with this statement?
Any comment on this question?
- Edmund Cannon: I’m uncertain. Waiving patents requires thinking about the details (what are the conditions, for how long, for whom?).
- Anonymous: I strongly agree. The economic cost of COVID-19 has been very large. Without large-scale vaccination, the risk of “vaccine-resistant” strains emerging increases daily, increasing the risk of further lockdowns. Anonymous: I disagree. Next pandemic labs will remember that we decided to take the vaccines and will be harder to negotiate with them. This is a problem that the Government must have solved before reaching any agreement: you want the patents, then you should have become a proper partner and, presumably, paid more for the vaccines. Handsight is always 20/20.
- Anonymous: I agree. Yes, but they should be “bought” by governments, i.e., there should be compensation depending on how much research was funded by the company. E.g., limited in the case of AstraZeneca. Arpad Abraham: I agree. One has to worry about the effect of creating a precedent that potentially discourages future innovation, however, the overall positive effect probably dominates.
- Peter Spittal: I disagree. Reneging on already-awarded patents feels dangerous to me: how will doing so affect incentives to innovate quickly next time? Perhaps patents were not the right approach to begin with (e.g. some have argued for contests, with large up-front prizes instead of reimbursement through monopoly pricing). But, given that we went with patents, I don’t think we should waive them.
Verdict: One in every two economists either agreed or strongly agreed with the notion of waiving Covid vaccine licences. The obvious benefit emphasised is that, the simpler it is to develop vaccines, the easier it is for governments to keep on top of new strains of the virus and prevent future lockdowns. But if medical researchers realise that they have been developing the vaccine without any financial reward, then they will be less incentivised to develop vaccines for future epidemics. This disincentive is too severe an effect for some economists, and it tips them over to the ‘disagree’ side of the argument. But if the point of contention between the economists boils down to how heavily they weigh their costs and benefits, the benefits appear to outweigh the costs (only 31% ‘disagree’; 0% ‘strongly disagree’). Still, 19% of the economists find it too difficult to determine if there are more pros than cons to patent waiving.
It is interesting to compare and contrast the results here to those of the 82 European and American economists on the IGM panel, who recently answered a similar question. On this panel, 87% of experts agreed that rather than waiving patents over vaccine production, developed countries should pay pharmaceutical companies to manufacture and distribute vaccines. Hence, the IGM panellists are less supportive of patent waiving than Bristol’s economists (but perhaps this is due to the different way the questions were framed).
Question 2: The recent US stimulus package is the largest in American history. Do you agree that the US economy is at risk of high rates of inflation?
Any comment on this question?
- Edmund Cannon: I disagree. Depends on what one means by high rates of inflation. I think inflation will go up, but that could be a good thing if it gets up to a few percentage points.
- Anonymous: I disagree. Historically, the base level of inflation is extremely low. Even with a large stimulus package, the overall threat of “high” inflation remains low, but there may be an increase in inflation.
- Anonymous: I’m uncertain. We are in the presence of both a supply and demand shock so where equilibrium prices are is quite difficult to assess. Part of what we see now is demand recovers faster than supply, and there is pressure on some products (it is informative which sectors are under pressure) but whether the stimulus will put more pressure on assets rather than other goods is not clear to me. The second point is that Biden is trying to raise taxes, which will reduce the deficit and, therefore, may reduce the inflationary pressure. I need to look more at the consumer and producer price indeces, but also at other sectors (and employment in those sectors). One thing to me is clear: inflation will not be as bad as people are saying.
- Anonymous: I disagree. Inflation can always be controlled by the Fed, and it is unlikely that we go back to inflation levels before the mid-80s.
- Arpad Abraham: I disagree. Modern monetary policy seems to be able to deal with high inflationary pressure without reducing economic activity significantly.
Verdict: Just over half (56%) of the economists either disagree or strongly disagree that Biden’s economic stimulus will be overly inflationary. Given how near the zero lower-bound the US economy is currently at, the inflationary effects of the stimulus is no cause for concern for several of the economists. Two economists mention that, even if inflation does eventually prove problematic, the Fed will know how to stabilise it with monetary policy. There is some uncertainty for a quarter of the economists – one nuance is that inflation might differently impact assets as opposed to other goods, and another is that inflation from the demand-side might be negated by deflation from the supply side. Very few economists (19%) agreed with the question, and none who did so were inclined to make a comment.
Question 3: The governor of Ohio has announced a weekly lottery offering $1m to boost Covid vaccination uptake. Do you agree that a similar scheme should be introduced in the UK?
Any comment on this question?
- Anonymous: I’m uncertain. Whilst there may be benefits of offering extrinsic motivations to vaccination (such as increasing the uptake), there may be unintended consequences.
- Anonymous: I disagree. Vaccine hesitancy is not going to be solved with a ticket that pays $2 in expectation: most likely it will induce those that were waiting for a couple of weeks to do it today but will not affect those that do not want. The issue in the US is significantly different than in the UK and I think in the UK more information and a clear policy communication strategy is better. I would also request vaccination to travel on planes and long distance trains unless exempt. That would make people think about vaccination.
- Anonymous: I’m uncertain. Uptake is quite high in the UK; no need for large incentives, even though pockets of deprivation may remain under-vaccinated.
- Arpad Abraham: I disagree. There does not seem to be a major lack of vaccination take-up in the UK (as opposed to the USA and continental Europe).
- Peter Spittal: I disagree. My understanding is that vaccine uptake in the UK is high, and on track for hitting the levels needed for population immunity. Given this, it does not seem like there is a need for extra incentive (which could also e.g. risk crowding out intrinsic motivation, signalling that getting a vaccine is “bad” and requires payment, etc). But if it was the case (now or in the future) that there was very low uptake this could be a good way to encourage it.
Verdict: This question did not elicit any strongly held arguments, and the joint-largest category was ‘uncertain’. This is a predictable result, given that no such lottery scheme has ever taken place before (let alone the pandemic it is in the context of). However, twice as many economists disagree with the lottery as those who agree with it (40% as opposed to 20%), and no economists who ‘agreed’ made any comment to back their views up. Of those who are opposed to the lottery, there were four comments made about how vaccine uptake is less of an issue in the UK as it is in America. One economist argued that there is a low expected value of participating in the lottery, although this assumes all Brits are rational and none are ‘risk lovers’. This same economist also stresses the existence of other incentive schemes for vaccination, like ‘vaccine passports’, over a potential lottery.
This survey aimed to find the expert consensus on three topical economic questions. On whether or not the patents for the development of Covid-19 vaccines should be waived, there was tentative support. On the potential for an inflation problem in America in the aftermath of its recent stimulus package, the economists were largely unconcerned. Finally, there was some uncertainty – and little support – for an Ohio-style lottery scheme to encourage vaccine uptake in the UK. Overall, the largest consensus was for the second question, and the least consensus was reached over the third one.
What would you like to Ask the Experts?
Send an email to Ethan with your suggestions for future questions on this blog.