🎧 How to Boost Innovation
Alex Tabarrok and Yascha Mounk discuss how to make America more agile and resilient in dealing with crises.
Alex Tabarrok is a professor of economics and co-author, with Tyler Cowen, of the blog Marginal Revolution. A strident critic of institutional failure during the pandemic, Tabarrok has applied his libertarian perspective to a wide range of topics, including public health, regulation and the law, criminal justice, and entrepreneurship.
In this week’s conversation, Alex Tabarrok and Yascha Mounk discuss the failure of American institutions to respond to COVID-19, the cost of insufficient economic innovation, and the possibility of building a more agile and resilient American society.
This transcript has been condensed and lightly edited for clarity.
Yascha Mounk: You were really one of the first people to warn about the severity of COVID, and the fact that many of our political institutions were getting the response to COVID wrong. How should the last year update our view on what’s working and what’s not working in our societies?
Alex Tabarrok: It was worse than I thought, and I'm a libertarian sort of person [who is] skeptical of government to begin with. I thought that the CDC was the world’s premier pandemic-fighting organization. This is the reason they were created. I was less surprised that the FDA failed. They were committing their usual blunder of being far too slow, which was especially dangerous given a pandemic. But to see the CDC fail, and to see some of the other political institutions fail, was, even to me, very surprising.
Mounk: What is it that we should have done in the United States over the last 16 months or so but didn’t?
Tabarrok: There was, first of all, the simple failure on [each institution’s] own standards. [...] We had this very paradoxical, crazy situation, where usually private firms are allowed to create their own tests. But because it was an emergency, they had to now apply to the FDA to do this. It slowed everything down. South Korea did the complete opposite. They gathered all of the test manufacturers, literally in a train station—“We don’t even have time to get to a hotel, so we’re just going to get everyone together at the train station, we’ll find a room”—and the South Koreans told their test manufacturers, “Look, start producing these tests, we’ll approve them later.” CDC and the FDA did exactly the opposite. This is the very beginning of the crisis. And because we didn’t have testing, we didn’t have an idea where the hotspots were.
That was the last, best chance to get a South Korean [or] Australian outcome, to really suppress it in the United States. Because of that failure to develop these tests and the delay in weeks, we took that kind of outcome off the table.
I remember, I put one of these apps on my phone, [which] was supposed to indicate when somebody else in the area around me had the app, and whether they had been in contact with anybody with COVID. I had it on there for weeks and months, and there was never any indication that anybody else had it. The demand just wasn’t there. It is surprising, because the technology was totally there. Google and Apple both made that technology available. And it could have been done without implicating privacy, but the demand just wasn’t there. The government certainly didn’t want it either. Trump didn’t want it. [...]
The FDA acted much more quickly than they usually do, but it was much too slow, far too slow. Once Pfizer had submitted a vaccine, the FDA took three weeks to schedule a meeting. This was in December, when rates were increasing sharply. Literally thousands of people were dying every single day. In between the time that Pfizer submitted their EUA [Emergency Use Authorization] and the FDA approved it, over 40,000 people died. This was a time when weeks really mattered. Not only could they have been approved sooner, but they could have been available sooner.
Mounk: What kind of major reforms should we institute to be able to deal with the next pandemic better, but also to be able to deal with all the other kinds of ailments?
Tabarrok: One of the silver linings of the pandemic is that people are beginning, almost for the first time, to be able to see what I call the “invisible graveyard.” [It’s] the place where you bury people who died because of FDA delay. Usually, you don’t see it, because if the FDA approves a bad drug, and someone dies, then people are upset. They know that this drug killed their loved one, and they protest, and there are congressional hearings. But if the FDA fails to approve a good drug, a drug that could have saved lives had [it] been available sooner, no one knows the people who die because of that. We know that they exist statistically, but we don’t see them. They’re just ghosts. And what the pandemic has done has shown many more people that FDA delay can kill. It can kill because good drugs are not available, either because they’re delayed, or because [...] the expense of producing, researching, developing, and getting a new drug approved is pushed so high; it takes over a billion dollars to get a typical new drug approved. That means we get fewer new drugs, there’s drug lag, and then there’s drug loss, [which all] end up killing people, but it’s hard to see.
Mounk: What causes this? Part of it is the bureaucratic structure of an administrative state, and the attempts of government agencies to hoard power and remain relevant. Another part of it is, I think, a set of moral conceptions. [For example], the logic for not doing human challenge trials [in which participants volunteer for exposure to a pathogen to test experimental treatments] is that it’s immoral to put people in harm’s way. The job of a doctor is to cure people, and if you give them a vaccine that may or may not be effective and expose them to the coronavirus, you’re potentially harming them, and that goes against medical ethics. [But] it seems to me that we put people in harm’s way with their consent all the time in society: soldiers, firemen, coal miners. In all of those areas, we say, “Look, this is a dangerous job,” but, in part for the good of the community, you’re willing to do that.
How much of this is just bureaucratic politics and institutional capture and the sort of things that always happen in bureaucracy, and how much of this is a set of misguided moral notions that make us insufficiently experimental and give us insufficient urgency in [approving] drugs and treatments?
Tabarrok: In my view, it would have been perfectly rational for an individual to take an unapproved vaccine, especially for the elderly [or] for somebody in a nursing home [and] for somebody interacting with the public [like] a physician [or] a nurse. It would have been perfectly rational for people at high risk to take an unapproved vaccine. And yet, that was not even on the table. [It] was barely discussed at all. I’m sure a lot of people know now [that] the vaccine was actually designed within days of the viral code being published. In fact, within months of that, within weeks of that, the vaccine was being produced and stockpiled. We actually had a vaccine back in January , and we could have started producing doses. But that was never even discussed, this idea of risk and reward trade-off. Let’s just let individuals be able to decide for themselves, “Do I want to take this vaccine, even if it’s unapproved?” There was a RaDVaC [Rapid Deployment Vaccine Collaborative] vaccine—an open-source, home-brew vaccine, which was supported by a number of top scientists including George Church, one of the most important scientists of the 20th century. So it was possible, but it never got big support.
Mounk: I want to get a little bit beyond the pandemic, because I think all of this strain of thought also comes out of your broader economic thinking. In the same way in which there’s an invisible graveyard of people who have died because particular drugs have not been improved, there’s a sort of “graveyard of inventions,” right? [These are] important inventions and innovations that would do a lot of good to human beings, but we’re not [developing them] because we're not making the right investments into basic science [and] because we have regulatory constraints. How would you reshape the economy to maximize those innovations?
Tabarrok: My colleague Tyler Cowen has called this the “Great Stagnation.” Productivity growth has declined tremendously beginning around the mid-1970s. We’ve had almost zero productivity growth since 2000, and that’s really disturbing. We do not live in a technologically progressive era. We think we do. [In] 1903, the Wright brothers fly, and by 1969, we’re on the moon, right? We have not had that kind of progress since. Part of it may just be bad luck, part of it may be [that] you get some technological innovations which cause you to make a leap. But I think a lot of it also is regulatory. A nice metaphor is throwing a pebble into a stream. You have a regulation, it’s a good idea, and you throw the pebble into the stream. Nothing happens. And then you throw another one in; it’s also a good idea. There are good reasons for the regulation, at least on paper, and you throw that pebble into the stream, and you keep doing this. No single regulation in and of itself is bad, but you just add them on top of one another, and they begin to interact and interfere, and so then it becomes much, much more difficult to actually get anything done. My wife is a microbiologist, and most of her time is spent on paperwork either looking for funding or dealing with regulations: safety regulations, environmental regulations, human personnel regulations, harassment training, all of this stuff. [For example,] yes, we want lab animals to be well treated. Each one of these things is individually valuable, but then that’s an hour out of a week, and the next one is an hour out of the week. Pretty soon we’re in a situation where most of my wife’s time—a Ph.D., someone who should be saving the world—is spent on paperwork. And that’s true throughout the sciences.
Mounk: How much of a problem is regulation, and how much of a problem is lack of investment in basic science [vs. applied science]? Do you think we should be putting more money into basic science, and is the lack of funding for that one of the reasons for this stagnation, or do you think that’s a sideshow and the important thing is the regulations?
Tabarrok: Both. Most [research and development] is private. […] There is quite a bit of money for applied R&D, and that’s where regulation is an issue. On basic science, there is a good economic argument for investing in it. I can certainly say that we spend an awful lot of money dividing the pie and comparatively little growing [it]. For example, we’ve had huge debates in the United States about health care, which is all about dividing. Maybe Obamacare is a good idea, or maybe [not]. Maybe expanding Medicaid is a good idea—whatever. I don’t want to get into that. All of the economics indicates that if we could cure cancer, that would be worth trillions. Trillions. I do believe there is massive under-investment in the research side of it. All of the attention is paid on the distribution side of health care, when actually, [regarding] distribution, we’re at the flat [end] of the curve. On the margin, health care is not that effective.
Mounk: If we had a politician come in saying, “My main goal is to make a more innovative society,” what should they do now to reap the benefits of political changes and investments 20, 40, 50 years from now?
Tabarrok: On a world scale, I’d like to see much more experimentation. One problem with globalization is that countries have come to behave in very similar ways. There are two charter cities starting up in Honduras, which have the potential to really start anew, with an entirely new set of the best rules that have been developed elsewhere. I would like to see more experiments like that. We have very few experiments in governance. This is supposedly one of the benefits of the federalist system. But the federalist system is another thing [that] has almost disappeared in the United States. Again, you can see this in the pandemic—very, very little experimentation across states. The red states opened early and the blue states did more shutdowns, but no state governor approved vaccines before another state governor, [and] no state governor did a huge testing program compared to other states.
Mounk: I want to change topics a little bit because I know you’ve also done interesting and important research on crime and policing. A lot of the things that are best about the United States at the moment are downstream benefits from the fact that we’ve managed to reduce crime rates very significantly since around 1990 or so. How seriously do you take this recent spike in crime?
Tabarrok: I take it very seriously. As you said, there was a huge decline in violent crime beginning in the 1990s. And this has been a tremendous benefit, especially to minority communities. I worry that the pendulum is going to swing too far, with all the talks of defunding the police and reducing jail and so forth, which, on balance, I’m in favor of. The police do reduce crime, and we’re kind of forgetting this obvious fact, but it’s true.
Mounk: What is the evidence for that?
Tabarrok: There’s a lot of evidence. [... In a 2005 study, Professor Jonathan] Klick and I looked at what happens to crime in D.C. when the terror alert level [which activates additional police patrols] goes up. What we find is that crime in D.C. goes way down; particularly street crime like automobile thefts go way down. So that’s one piece of evidence. Studies like mine have been done in different cities at different times in different places in the world, and they all reach substantially the same conclusion, which is actually that we are under-policed in the United States. We could easily double the number of police officers, and that looks like it would be beneficial.
Now, clearly, there are problems with the police, so what I have argued is that we need to make people in all communities comfortable enough with the police so that we can have more of them, so that everybody is happy with having more of them. And that means a higher quality of police in order to get a higher quantity of police. We’re not going to get political agreement on a greater quantity of police until we also have agreement on a greater quality of police. But I think if we could do both of those things, we would be a lot better off.
Mounk: I worry that when we’re talking about public servants, including policemen, we have the same problem: the alternative career that is available to the kinds of people we would love to have in police departments is going to pay them so much more money.
Tabarrok: We try to do government on the cheap in the United States. The [prime minister] of Singapore earns [nearly] a million dollars a year. I think it’s the highest in the world. In general, the bureaucracy in Singapore is paid very highly, and they get extremely smart and talented people. I’ve had the pleasure of interacting with some of the bureaucrats in Singapore, and they’re brilliant people. They are at the top of their game and the world standard.
There is an argument for paying [more for] civil servants, even politicians, police officers, [and] teachers. You have to pay them more, but then you have to fire the bad ones. You need that package deal. And this is true for teachers as [it’s] true for police officers. The very best teachers generate a tremendous amount of value for their students—it’s really quite remarkable that having a really good fifth-grade teacher [can be seen] in the wages of that teacher’s students 20 years later. We don’t reward that enough. I think it is valuable to pay high-quality teachers more, but you can’t fire a teacher now. You can’t get rid of the bad teachers. There’s so much security. The same thing is true with police officers. We know there are these horror cases.
Mounk: What is your broad sketch of how we should set up a society that is both fair to its citizens—that gives them a decent, humane standard of living—but also allows us to overcome all of the different kinds of problems you’ve talked through over the course of the last hour?
Tabarrok: We’re pretty far away from my ideal, so instead of thinking about [that], I think about the vector that we should be going in. I mostly agree with the vector that you have [put forward]. I’m much more concerned about getting rid of regulation, creating a more entrepreneurial society, and getting rid of bureaucracy than I am with getting rid of a social safety net. So on that, we agree. Now, here’s the point where I would disagree somewhat: I want more experimentation in the world. I do not want the United States to be a European welfare state, if only because I want to see a more diverse world. One of the big advantages of the United States not being a welfare state is that we can have a lot more immigration. It’s very difficult to have a lot of relatively poor people come to your country and to have a high minimum wage and universal health care.
To me, the biggest way to improve welfare around the world is immigration. Somebody who emigrates from Honduras or from Haiti to the United States [is likely to have their] wages go up by a factor of 10. Introducing people to the American capitalist system is much bigger than any gain that the welfare state produces. If it comes down to a choice between immigration and the welfare state, [then] too bad for the welfare state, in my view, because immigration is actually a much better way of raising welfare for the world as a whole.
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