Larry Summers discusses his tenure in health economics at SIEPR.
When Larry Summers was Chief Economist of the World Bank in the early 90s, he was able to choose the topic of their World Development Report (WDR). Before his commissioned report launched in 1993, Summers described the World Bank agenda as a “Hoover Institution agenda of disinflation, deregulation, and establishment of property rights.” Although he did not necessarily disagree with the methods of the World Bank at the time, he was dissatisfied with the absence of moral goals; were World Bank actions actually improving the lives of those in the developing world? With that in mind, Summers commissioned one of the most widely-read and influential WDRs published by the World Bank: “Investing in Health”.
His intent was to bring health issues to the attention of the economic policy community, and economic analysis to the health and health policy community. Looking back, Summers believed the report caused the World Bank to “be more focused on its social impact.” But the report didn’t just affect the World Bank; one of its most influential readers was Bill Gates. While Summers did not claim responsibility for the work of the Gates Foundation, it clearly followed his lead, and is now extremely successful, with robust investments in HIV, malaria, tuberculosis, and other diseases that often do not gain the spotlight of the medical and research community.
The World Development Report argued that global health resources should be focused on research and development, vaccines, and pandemic prevention, leaving on the ground improvements in health to domestic governments and organizations. On this, Summers paused and commented: “The world is way short on focus with all of the issues associated with pandemic.”
Summers listed off a variety of somewhat shocking anecdotes and comparisons regarding pandemics. “The Stanford Football program has more money than the World Health Organization spends on pandemic flu.” “Ebola showed quite clearly that we do not have a playbook for how to respond to a pandemic.” And Ebola is only one layer of the potential pandemic problem. The world lacks vaccine stocks and research on diseases that could spread quickly in developing countries. Spending on pandemic prevention is miniscule compared to issues like climate change, and health-system infrastructures in developing countries desperately need support.
The lack of pandemic preparation is not shocking. Research is not cheap, and there’s a key ‘market failure’ that reduces the incentive to invest and innovate: during an emergency, the world will not let businesses that have invested the research and capital into creating medical solutions make a profit on their work. Major donors are also incentivized to keep large funds and respond to problems, because then they can see the tangible impact they are making, rather than making smaller contributions to ventures and ideas that only have the possibility of preventing or mitigating a medical disaster.
There is also no standardized measure to determine the full impact of a pandemic within an economic framework. After all, how do you calculate the value of a life? Paul Wise, a health and health policy professor at Stanford, pushed Summers on the subject, asking if he really thought creating a valuation for life would resolve the problem. According to Summers, any single dollar value for lives saved will be more or less arbitrary. However, the adoption of a scientific methodology to analyze pandemic impact is necessary, since it would elevate the issue on the world stage, gaining the attention given to comparable issues, such as climate change.
At the end of his hour-long conversation with Wise, Summers concluded with a call to action and a defense of economics. For universities and governments, he argued that there is underinvestment in every aspect of the natural sciences. For advocates of government allocating dollars to pandemic prevention and research, he explained the necessity of better understanding “the pressures of people they are trying to persuade.” For economists, he affirmed that “things are not less real because there’s a long causal chain.” Just like the individual work a doctor performs on a patient, the economist can influence the allocation of resources to further enable those physicians in improving the lives of patients. “You can ‘count’ and you can ‘care’,” ended Summers.
In fact, he added, the more important the issue, the more important it is that you count and analyze well.
*Photo credit: National Cancer Institute