Help Me Understand This, Somebody…

A fellow Puneri citizen sent out this tweet yesterday:

It was hard not to be snarky, and I didn’t even bother trying to resist:

But in my day job, I try to be an economist, and so I have questions. Just two of them, and they’re fairly simple ones. Here they are:

  1. He (or SII) was free to set the price, correct? Free market economics: let the seller decide the price, and let the buyer decide if she wants to buy at that price.

    So the price now stands reduced by a whopping 25%. Does that mean that it was set too high in the first place?

    That is, let us assume that SII is able to increase capacity expansion at a price of 300 per dose. Also assume that it can make a normal or “super” profit at this price – then was 400 not too high?

    If we assume that he was going to earn an extra 100 rupees per vaccine sold, and that he was going to sell say 200 million vaccines to the states, that’s 200 million into 100 rupees.1

    I don’t want to do the math, but were we ok with at least that much “extra” money going into the Poonawalla coffers until yesterday?

    If yes, why?

  2. Unless, of course, that was not the case, and capacity expansion will suffer at a price of 300. A raise in the minimum wage will mean switched-off air-conditioning, correct? Well, in that case, is it not our moral duty to ask him to take the price back up to 400? Because if the opportunity cost of his philanthropy is reduced capacity expansion, isn’t that worse?

(By the way, all this is taking the assumption that SII “needs” the proceeds from the sale of this one vaccine alone to fund capacity expansion. That may or may not be true. And this also assumes that this is the only vaccine that SII will be producing and selling, which is obviously not true. Even in this “best-case” scenario, my questions hold up – if we do a full reckoning, they become even more important!)

If it is the first point above, us economists must explain why we think it is ok for those 100 rupees (per dose) to go into SII’s coffers.

If it is the latter, there ought to be a stream of op-eds beseeching Mr. Poonawalla to roll back his offer, for that would be truly philanthropic.

Which will it be?

And I know I said only two questions, but forgive me my greed, and let me ask one more: what is the definition of “transparent pricing”?

  1. Where do I get that number 200 million from? Who knows? I assumed that for the 960 million people in total who become/continue to be eligible on the 1st of May, he gets to sell only 200 million doses to the states. And yes, I am assuming only a single dose for these 200 million. Since nobody knows what the quantities are actually going to be, this is as reasonable an assumption as any other. If anything, this is a very conservative estimate. No?[]

The Vaccine Responsibility by K. Sujatha Rao

I and a friend have been exchanging messages about the idiocy that was the European Super League (or whatever the name was. I’m not even going to bother looking it up). He asked me if I would post anything here about the economics behind the league, either defending the idea or refuting it.

Here’s one paragraph from a previous post of mine that I would want to base that essay (if I ever write it) on:

When David Perell says that we have made the world cheaper, what I think he is saying is that we have figured out ways to cheapen the effort that we are willing to put into the act of consuming something. That something could be a meal, but it could also be extended to reading, viewing, or listening as well – and more besides.

To me, the ESL is based on the assumption that a large number of us fans are willing to cheapen the effort that we are willing to put into the act of consuming football matches – that we are not looking to maximize soul. Thankfully, so far, that assumption seems to have been ever-so-slightly off the mark.1

Anyways, he wrote a post about it, and we’ve been sharing stuff about it on and off. I sent him one written by Jonathan Wilson, and he sent me this response: “I seem to have covered largely the same points with way less finesse.”

To which my response was, that is my middle name.

Now, I didn’t need to write any of that, and any half-decent editor would have lopped off that whole bit – and quite rightly too. But hey, this is my blog, I had fun writing it, and it was a welcome break from you-know-what.

But “I seem to have covered largely the same points with way less finesse” is all too applicable in my case when reading K. Sujatha Rao’s excellent article in the Indian Express today on India’s vaccination drive. It is worse in my case of course, because I haven’t even covered largely the same points, forget the finesse.

I won’t excerpt from it, because it deserves to be read in its entirety.

But I will reiterate (in my won words) points that I thought were especially crucial, and also list out some questions that I had after I finished reading it.

  1. The point about the utilization of the vaccines that will be procured by the Government of India (GoI) is really a request for clearer communication. You simply cannot overstate the importance of clear communication.
  2. If SII has received grants from GAVI and from the Central government, would a publicly available dashboard about capacity, supply chain bottlenecks, vaccine allocation by states/countries and specific timelines for capacity expansion be possible? I’m not trying to be snarky, I am genuinely asking. What are the reasons against such a dashboard being made publicly available?
  3. I’ll ask again: Imagine a good with large positive externalities. Let’s call this good a vaccine. Let’s say that the supply of these vaccines is going to be tight. Let’s say that demand is very inelastic. Would you recommend fragmenting total market demand into smaller constituent curves? If yes, why?
    K. Sujatha Rao makes the legal argument in her article, and then makes the economic argument. Read both (and again, not being snarky), please tell me why we are choosing to do what we are doing – in this year of all years, and for this good of all goods.
  4. She speaks of halving the estimated cost of INR 60,000 crores by invoking compulsory licensing and expanding production through the 18 manufacturing facilities in India. These must be back of the envelope calculations, obviously. But if anybody reading this has information on how one might create such an estimate (and an estimate of how much production will go up by via this route), please let me know.

Please, do read the article.

  1. Sarcasm alert: the evil idiots who dreamt up that monstrosity have gotten exactly what they deserved. Not enough of it, if you ask me.[]

The Contours of the NCDVP

That’s the Nationalized Centrally Driven Vaccination Programme.1

The article in Scroll that I linked to yesterday was the easy part. The much more difficult part is to work out what might come in its place.

We (Murali Neelakantan and I) attempt to outline such a plan in this document. (PDF version 1.0 here)

It is a document written literally on the fly, and there are bound to be errors. Equally, there are bound to be aspects we have not thought of at all, or not thought out well enough. That’s the point of this post: please, read and let us know what we’re missing, and how it can be made better. If it is the most hare-brained thing you’ve ever read, let us know that too – but please, also do tell us why you think so.

Please note that we will continue improving upon the Google doc as we go along, so it will naturally keep on changing.

Finally, if you find merit in the arguments we have made, please, help it reach a wider audience.

Thank you!

(@ashish2727 for me on Twitter, and @grumpeoldman for Murali Neelakantan on Twitter)

  1. As you can tell, marketing is not our forte[]