[Script Info]
Title: 
[Events]
Format: Layer, Start, End, Style, Name, MarginL, MarginR, MarginV, Effect, Text
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,♪ [music] ♪
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,- [Alex] Hi, everyone.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,Today, I want to talk about \Napplying some of the principles
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,of economics, namely \Nexternalities and incentives,
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,to understand COVID\Nand vaccine policy.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,Let's begin with a simple flu shot.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,A flu shot is a great example of \Na good with a positive externality.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,When I get a shot, \NI benefit myself,
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,but I also benefit other people
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,because I'm less likely \Nto transmit the virus.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,In fact, the economist \NCorey White has estimated
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,that every two flu vaccinations\Nsave someone else
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,from getting sick \Nand having to miss a day of work.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,And every 4,000 vaccinations \Nsaves a life.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,That's an incredibly \Ncost-effective way of saving a life.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,The problem is that even though\Nthe social benefits are very high,
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,people are unlikely to weigh\Nthe social benefits
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,as high as the benefits \Nto themselves.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,So individuals are \Nunder-incentivized to get a flu shot.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,Now we deal with \Nthe external benefits
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,of vaccinations \Nin a variety of ways.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,In some cases, such as polio,\Nwe require school children
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,to be vaccinated by law.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,In other cases, we offer incentives.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,We subsidize vaccines \Nto keep the price low.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,It's not just government policy \Nby the way.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,Some firms will offer \Ntheir workers free flu shots.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,That's an interesting case \Nwhere the employer internalizes
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,some of the positive externalities \Nfrom vaccination.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,COVID is especially fascinating\Nbecause we can actually see
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,the externalities in market prices.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,Whenever one \Nof the vaccine companies
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,has even a little bit of good news,\Nsay, from a clinical trial,
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,the entire stock market jumps up.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,Airline stocks, for example, \Nthey jump up
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,with every bit \Nof good vaccine news.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,The airlines, in other words,\Nare capturing some of the benefits
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,produced by vaccine manufacturers.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,And since the vaccine manufacturers\Naren't capturing all of the gains
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,from producing vaccines,
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,the vaccine companies \Nare under-incentivized.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,Now this is a case \Nwhere economics leads you
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,to a completely different conclusion\Nthan the man in the street.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,The man in the street is worried\Nthat the vaccine manufacturers
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,will profit too much \Nfrom a vaccine --
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,that they will price gouge.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,The economist is worried \Nthat the vaccine manufacturers
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,aren't profiting enough.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,By the way, innovations in general\Nare under-incentivized.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,The Nobel Prize-winning economist \NWilliam Nordhaus has estimated
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,that innovators they only receive \Nabout 2 to 2.5% of the value
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,of their innovations.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,Now we do have some institutions\Nto try to alleviate this problem.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,We subsidize basic research \Nin universities,
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,and we offer firms patents, \Nfor example.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,But neither of these solutions \Nis going to work well for COVID.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,It's too late to subsidize \Nthe basic research.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,And a patent is exactly \Nthe wrong idea.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,A patent raises the price above \Nthe competitive price,
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,but we know the competitive price\Nis already too high.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,For a good with a positive externality \Nlike a vaccination,
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,we want the price to be below \Nthe competitive price.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,So a patent creates \Nsevere misallocation of resources.