Via Mark Thoma, here is an interview with the ever-impressive Kevin Murphy. One excerpt, on the topic of medical R&D:
What really does matter is the cost of treatment. If treatment costs
are $10 trillion, the project has a negative net present value even if
the research is free. With $2 trillion in treatment costs, the net gain
from success is $3 trillion, so that we would get a good return even if
the probability of success was one in 30. So when you think about
research, it’s not the dollars you spend that matter–what matters is
the cost of implementing the treatment that might be discovered. The
downside to research is not failure, but unaffordable success.
I think the following message comes out of that exercise: Cost
containment and health progress are complementary. That is, if we can
control costs, that makes research a much more attractive option.
That’s the most important lesson I learned from doing this work.
When you go to Washington and talk to people at NIH, what are they
excited about? They’re excited about that $5 trillion number. They’re
excited that, boy, we could do something that could generate tremendous
value for people. We can cure disease and lengthen lives, both of which
make people much better off. The work that Bob and I did quantifies
that number; it says it’s huge, $5 trillion for that 10 percent
reduction in cancer.
You walk across the street and talk to the guys who have to pay for
it, and they’re terrified that people are going to come up with more
new medical treatments that they’re somehow going to have to finance.
Is there any man who thinks more like an economist than does Kevin Murphy? Maybe one:
Region: Does Gary Becker ever stop working?
Murphy: No. He never stops working. He’s a machine. He outworks everybody half his age.