Paul Romer on fizzy drinks and Covid-19 testing
Lovely thought-experiment by
a Nobel laureate: “Imagine a world”, he writes, “in which the only way to get a
soda is to get your doctor to write a prescription”. It costs $20 per can.
Your insurance company pays.
The economy produces about 100,000 sodas each day.
If you lived in this world, do you think you could get people to scale up the
production of soda to a level of millions of cans per day? It would be a
challenge, but not because it is hard to produce and distribute soda.
This is the point of the thought-experiment.
Because they have to
keep total costs from running out of control, insurance companies, health care
providers, and government regulators have cobbled together a system that limits
access to soda. One part of this system is an expensive regulatory process that
has to approve: the ingredients in each particular brand of soda; the paper
insert that comes with the soda informing patients about its risks and
benefits; and the delivery system used by the soda supplier, be it a glass
bottle, an aluminum can, a paper cup, etc.
Then, suddenly,
everyone decides that they want more soda. Why, they ask, can’t the nation
produce enough soda for everyone to have some each day? Here’s what happens:
- The only people who can get sodas are those already under the care of the health care system. They are not thirsty, but the insurance company covers the cost, so whatever.
- People who are thirsty start going to the
hospital just to get soda. Doctors comply with their requests for a prescription.
Soda producers try to increase output, but soon run into “bottlenecks.”
One vendor with an approved soda delivery system that packages a straw
with a can finds that its supplier of straws can not keep up with the
increased demand. This soda company explains to its unhappy customers that
it has FDA approval only for a product that includes a straw from its
traditional supplier. The soda company says that it is applying to the FDA
for an Emergency Use Authorization (EUA) that gives it permission to
bundle a can with a straw from a different vendor. As it waits, it keeps
repeating its excuse: “There is a straw bottleneck!”
- Meanwhile, researchers on university
campuses discover that you do not need a straw. But these researchers have
no reason to go through the laborious process of filing for an Emergency
Use Authorization that allows drinking from the can. The “straw
bottleneck” persists.
- In their experiments with drinking from
the can, these same university researchers realize soda is just flavored sugar
water and that they could produce millions of sodas per day at a price
well under $1 per can. The researchers publicize their findings. Policy
wonks urge them to get going: “Produce the sodas that a thirsty nation
needs.” But these do not say anything about who will pay for all these
additional sodas. The researchers are good sports, but they are not
idiots. They produce some token batches of soda and go back to writing
papers.
- The wonks are surprised to discover that
their meetings and documents do not yield the soda supply surge they
anticipate.
- Everyone gets discouraged. The wonks
conclude that even an economic system as big, as powerful, and as
innovative as the one we have established in the United States cannot rise
to the challenge of producing millions of sodas per day. They settle for a
stretch goal of offering one soda per month to each family.
For sodas read
Covid-19 tests and you get the point.
This is a nice example
of making complex processes comprehensible by translating them into everyday
scenarios.
I used a similar approach in my Slouching
towards Dystopia essay to
try and get readers to appreciate the absurdity of surveillance methods that would
be regarded as abominable in real life and yet are passively accepted in the
online world...
