Ezra Klein Steel-Mans Supply-Side Economics

Progressives should stop stimulating demand while restricting supply

He writes

The counterargument here is frustrating but important. Yes, Americans overpay compared to peer countries for drugs. But truly curing, managing or preventing disease is of extraordinary value to humanity. Pfizer and Moderna will make billions from their coronavirus vaccines, but they’ve created trillions of dollars in economic value by unfreezing economies, to say nothing of the lives saved. It is true that European countries free-ride off the high cost we pay for drugs, because it’s the U.S. market that drives innovation. But that doesn’t mean we’d be better off paying their prices, if that meant new drug development slowed. We don’t just want everyone to have health insurance in the future. We want them to be healthier, freed from diseases and pain that even the best health insurance today cannot cure or ease.

To this, progressives will note that pharmaceutical companies pump money into me-too drugs, spend gobsmacking amounts on advertising and administration, and make billions and billions in profits. And they’re right. It’s ludicrous to say that the pharmaceutical system we have now is oriented toward innovation. It’s oriented toward profit; sometimes that intersects with innovation and sometimes it doesn’t.

Too often, though, progressives let their argument drop there. They need to take the obvious next step: We should combine price controls with new policies to encourage drug development. That could include everything from more funding of basic research to huge prizes for discovering drugs that treat particular conditions to more public funding for drug trials. Years ago, Bernie Sanders had an interesting proposal for creating a system of pharmaceutical prizes in which companies could make millions or billions for inventing drugs that cured certain conditions, and those drugs would be immediately released without exclusive patent protections. Focusing on the need to make new drugs affordable while ignoring the need to make more of them exist is like trimming a garden you’ve stopped watering.

Ezra would score points for this piece in Arnold Kling’s Fantasy Intellectual Teams. By highlighting the strongest aspects of arguments that run counter to partisan progressive politics, he challenges his own readers to consider where they might be wrong and shows respect to his ideological opponents. He closes with this call to action

I don’t think these various policies have cohered into a policy faction, a way progressives think of themselves, at least not yet. But I’d like to see that happen. Political movements consider solutions where they know to look for problems. Progressives have long known to look for problems on the demand side of the economy — to ask whether there are goods and services people need that they cannot afford. That will make today fairer, but to ensure tomorrow is radically better, we need to look for the choke points in the future we imagine, the places where the economy can’t or won’t supply the things we need. And then we need to fix them.