Rachel Glennerster discusses the inefficiencies in pricing vital drugs during pandemics. The Market Shaping Accelerator aims to tackle global challenges through market innovations. They explore pull mechanisms driving market innovation and the importance of balancing incentives and market dynamics. The conversation extends to topics like universal vaccines, climate-resilient crop development, drug repurposing, and incentivizing air conditioning units in developing nations.
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Quick takeaways
Market shaping incentivizes innovation for societal challenges like pandemics and climate change.
Pull mechanisms like AMCs drive innovation by paying for outputs and balancing incentives for multiple market entrants.
A diversified portfolio strategy is essential to address both immediate solutions and high-risk breakthroughs for global challenges.
Repurposing generic drugs with pull mechanisms enhances readiness for evolving health threats cost-effectively.
Structured pedagogy in education supports student learning effectively by guiding teachers with lesson planning and teaching methods.
Deep dives
Operation Warp Speed and Vaccine Acceleration
Operation Warp Speed spent $12 billion to accelerate a COVID vaccine, estimating its cost-effectiveness even for small time gains. The urgency of accelerating vaccine development was underscored by the potential economic benefits of saving time in vaccine creation, as demonstrated during the COVID pandemic.
Market Shaping Accelerator and Incentivizing Innovations
The podcast episode delves into the concept of market shaping to incentivize innovations for global challenges. It discusses how markets can be harnessed to motivate innovators, highlighting the role of mechanisms like pull mechanisms, which pay based on outputs, to drive innovation and tackle social issues.
Challenges in Implementing Pull Mechanisms
Implementing pull mechanisms such as AMCs faces challenges like budget planning uncertainties and reluctance to borrow funds for future innovations. Designing AMCs involves setting the right price and balancing incentives for multiple market entrants. Moreover, addressing the potential for imitation of innovations and determining fair rewards for innovators are crucial implementation considerations.
Potential Impact and Cost-Effectiveness of Pull Mechanisms
Pull mechanisms like AMCs offer a cost-effective approach to stimulating innovation by paying for outputs. While there are setup costs and risks of failed innovation attempts, the overall benefits outweigh the expenses, especially in advancing crucial solutions like vaccines and climate technologies.
Incentivizing Innovation and Distribution of Near-Term Solutions
In addressing societal costs, political motivations, and the fast deployment of innovations, pull mechanisms can accelerate the development and distribution of solutions for near-term issues like climate change and pandemics. By creating incentives for solving almost-solvable problems, pull mechanisms not only drive innovation but also ensure broad and affordable access to impactful solutions.
Embracing a Portfolio Approach for Long-Term Innovation
To overcome the challenge of focusing solely on immediate solutions, a diversified portfolio strategy is essential. Balancing quick wins with high-risk, high-reward breakthroughs, such as climate-resilient crop development, allows for a comprehensive tackling of pressing global challenges and ensures sustained progress in innovation.
Unleashing the Potential of Repurposed Generic Drugs
The exploration of repurposing generic drugs offers a cost-effective strategy to address evolving health threats. By providing incentives for research and repurposing efforts, a pull mechanism can unlock the potential of existing medications for new diseases, enhancing readiness for future health crises.
Enabling Energy-Efficient Indoor Air Quality Solutions
Efforts to incentivize the development and adoption of energy-efficient indoor air quality solutions are critical in combating health risks and reducing environmental impact. By utilizing pull mechanisms tied to consumer behavior and innovation, the transition to cleaner technologies can be facilitated, benefiting both individuals and the environment.
Great Buy: Providing Information on Education Benefits
One key insight from the podcast episode highlights the effectiveness of providing information about educational benefits in low and middle income countries. By offering details on the advantages of education, such as potential earnings by staying in school or financial support for higher education, individuals are more motivated to work harder and stay in school longer. Despite its simplicity and low cost, this intervention yields substantial impacts by encouraging students to remain engaged in their education.
Structured Pedagogy: Guiding Teachers for Effective Learning
Another significant point discussed in the podcast episode is the concept of structured pedagogy in education. This approach involves providing teachers with structured guidance on lesson planning, matching appropriate textbooks, and aligning teaching methods with the science of learning. By assisting teachers in introducing concepts in the correct order and pace, this method supports student learning effectively. While it incurs higher costs compared to other interventions, the structured pedagogy approach offers substantial gains in improving educational outcomes.
"You can’t charge what something is worth during a pandemic. So we estimated that the value of one course of COVID vaccine in January 2021 was over $5,000. They were selling for between $6 and $40. So nothing like their social value. Now, don’t get me wrong. I don’t think that they should have charged $5,000 or $6,000. That’s not ethical. It’s also not economically efficient, because they didn’t cost $5,000 at the marginal cost. So you actually want low price, getting out to lots of people.
"But it shows you that the market is not going to reward people who do the investment in preparation for a pandemic — because when a pandemic hits, they’re not going to get the reward in line with the social value. They may even have to charge less than they would in a non-pandemic time. So prepping for a pandemic is not an efficient market strategy if I’m a firm, but it’s a very efficient strategy for society, and so we’ve got to bridge that gap." —Rachel Glennerster
In today’s episode, host Luisa Rodriguez speaks to Rachel Glennerster — associate professor of economics at the University of Chicago and a pioneer in the field of development economics — about how her team’s new Market Shaping Accelerator aims to leverage market forces to drive innovations that can solve pressing world problems.
How market failures and misaligned incentives stifle critical innovations for social goods like pandemic preparedness, climate change interventions, and vaccine development.
How “pull mechanisms” like advance market commitments (AMCs) can help overcome these challenges — including concrete examples like how one AMC led to speeding up the development of three vaccines which saved around 700,000 lives in low-income countries.
The challenges in designing effective pull mechanisms, from design to implementation.
Why it’s important to tie innovation incentives to real-world impact and uptake, not just the invention of a new technology.
The massive benefits of accelerating vaccine development, in some cases, even if it’s only by a few days or weeks.
The case for a $6 billion advance market commitment to spur work on a universal COVID-19 vaccine.
The shortlist of ideas from the Market Shaping Accelerator’s recent Innovation Challenge that use pull mechanisms to address market failures around improving indoor air quality, repurposing generic drugs for alternative uses, and developing eco-friendly air conditioners for a warming planet.
“Best Buys” and “Bad Buys” for improving education systems in low- and middle-income countries, based on evidence from over 400 studies.
Lessons from Rachel’s career at the forefront of global development, and how insights from economics can drive transformative change.
And much more.
Chapters:
The Market Shaping Accelerator (00:03:33)
Pull mechanisms for innovation (00:13:10)
Accelerating the pneumococcal and COVID vaccines (00:19:05)
Advance market commitments (00:41:46)
Is this uncertainty hard for funders to plan around? (00:49:17)
The story of the malaria vaccine that wasn’t (00:57:15)
Challenges with designing and implementing AMCs and other pull mechanisms (01:01:40)
Universal COVID vaccine (01:18:14)
Climate-resilient crops (01:34:09)
The Market Shaping Accelerator’s Innovation Challenge (01:45:40)
Indoor air quality to reduce respiratory infections (01:49:09)
Repurposing generic drugs (01:55:50)
Clean air conditioning units (02:02:41)
Broad-spectrum antivirals for pandemic prevention (02:09:11)
Improving education in low- and middle-income countries (02:15:53)
What’s still weird for Rachel about living in the US? (02:45:06)
Producer and editor: Keiran Harris Audio Engineering Lead: Ben Cordell Technical editing: Simon Monsour, Milo McGuire, and Dominic Armstrong Additional content editing: Katy Moore and Luisa Rodriguez Transcriptions: Katy Moore
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