It’s an unacknowledged peculiarity that police are in charge of road safety. Why should the arm of the state that investigates murder, rape and robbery also give out traffic tickets? Traffic stops are the most common reason for contact with the police. I (allegedly) rolled through a stop sign in the neighborhood and was stopped. It was uncomfortable–hands on the wheel, don’t make any sudden moves, be polite etc. and I am a white guy. Traffic stops can be much more uncomfortable for minorities, which makes the police uncomfortable. Many of the police homicides, such as the killing of Philando Castile happened at ordinary traffic stops. But why do we need armed men (mostly) to issue a traffic citation?
Don’t use a hammer if you don’t need to pound a nail. Road safety does not require a hammer. The responsibility for handing out speeding tickets and citations should be handled by a unarmed agency. Put the safety patrol in bright yellow cars and have them carry a bit of extra gasoline and jumper cables to help stranded motorists as part of their job–make road safety nice. Highways England hires traffic officers for some of these tasks (although they are not yet authorized to issue speeding tickets).
Similarly, the police have no expertise in dealing with the mentally ill or with the homeless–jobs like that should be farmed out to other agencies. Notice that we have lots of other safety issues that are not handled by the police. Restaurant inspectors, for example, do over a million restaurant inspectors annually but they don’t investigate murder or drug charges and they are not armed. Perhaps not coincidentally, restaurant inspectors are not often accused of inspector brutality, “Your honor, I swear I thought he was reaching for a knife….”.
Another advantage of turning over road safety to an unarmed, non-police unit would be to help restore the fourth amendment which has been destroyed by the jurisprudence of traffic stops.
As we move to self-driving vehicles it will become obvious that road safety does not belong with the police (eventually it will be more like air traffic control). We can get a jump start on that trend by more carefully delineating which police duties require the threat of imminent violence and which do not.
Defunding the police, whatever that means, is a political non-starter. But we can unbundle the police.
One of the few bright spots over the past week was Camden, NJ where instead of beating protesters the police joined them. Protests in Camden were peaceful and orderly and there was little to no looting. As I wrote last year, Camden disbanded its police force in 2013, nullifying the old union contract, and rebuilt.
Jim Epstein described the situation prior to rebuilding:
Camden’s old city-run police force abused its power and abrogated its duties. It took Camden cops one hour on average to respond to 911 calls, or more than six times the national average. They didn’t show up for work 30 percent of the time, and an inordinate number of Camden police were working desk jobs. A union contract required the city to entice officers with extra pay to get them to accept crime-fighting shifts outside regular business hours. Last year, the city paid $3.5 million in damages to 88 citizens who saw their convictions overturned because of planted evidence, fabricated reports, and other forms of police misconduct.
In 2012, the murder rate in Camden was about five times that of neighboring Philadelphia—and about 18 times the murder rate in New York City.
In May of 2013, however, the entire police department was disbanded nullifying the union contract and an entirely new county police department was put into place.
The old city-run force was rife with cops working desk jobs, which Cordero saw as a waste of money and manpower. He and Thomson hired civilians to replace them and put all uniformed officers on crime fighting duty. Boogaard says she didn’t see a single cop during the first year she lived in the city. “Now I see them all the time and they make friendly conversation.” Pastor Merrill says the old city-run force gave off a “disgruntled” air, and the morale of Metro police is noticeably better. “I want my police to be happy,” he says.
Camden remains a high poverty, high crime place to live but the improvement shows the importance of some fairly simple attitudinal changes–“It’s more of a protect-and-serve approach to dealing with the residents, rather than kicking down doors and locking our way out of the problem,” –and reforms such as restraining the police unions, focusing on violent and property crimes and not using policing as a revenue source.
Operation Warp Speed is following the right plan by paying for vaccine capacity to be built even before clinical trials are completed. OWS, however, should be bigger and should have more diverse vaccine candidates. OWS has spent well under $5 billion. At current rates, the US economy is losing about $40 billion a week. Thus, if $20 billion could advance a vaccine by just one week that would be a good deal. As I said in the LA Times, “It might seem expensive to invest in capacity for a vaccine that is never approved, but it’s even more expensive to delay a vaccine that could end the pandemic.”
I am also concerned that OWS is narrowing down the list of candidates too early:
NYTimes: Moderna, Johnson & Johnson and the Oxford-AstraZeneca group have already received a total of $2.2 billion in federal funding to support their vaccine programs. Their selection as finalists, along with Merck and Pfizer, will give all five companies access to additional government money, help in running clinical trials and financial and logistical support for a manufacturing base that is being built even before it is clear which if any of the vaccines in development will work.
These are all good programs and one of them will probably be successful but we also want to support some long-shots because a small probability of a very big gain is still a big gain.
The five candidates also all use new technologies and are less diverse than I would prefer. There are a lot of different vaccine platforms, Live-Attenuated, Deactivated, Protein Subunit, Viral Vector, DNA and mRNA among others. The Accelerating Health Technologies team that I am a part of collected data on over 100 vaccine candidates and their characteristics. We then created a model to compute an optimal portfolio. We estimated that it’s necessary to have 15-20 candidates in the portfolio to get to a 80-90% chance of at least one success and that you want diverse candidates because the second candidate from the same platform probably fails if the first candidate from that platform fails. Moderna and Pfrizer are both mRNA vaccines–a platform that has never been used before–while AstraZeneca, Johnson and Johnson and Merck are using somewhat different viral vector platforms (Adenovirus for AstraZeneca and J & J and measles for Merck) which is also a relatively novel approach. I think it would be better if there were some tried and true platforms such as a Deactivated or Protein Subunit vaccine in the mix. As Larry Summers said, “if you will die of starvation if you don’t get a pizza in two hours, order 5 pizzas”. I would change that to order 10 pizzas and order from different companies!
One way to diversify the portfolio is to make deals with other countries to avoid the prisoner’s dilemma of vaccine portfolios. The prisoner’s dilemma is that each country has an incentive to invest in the vaccine most likely to succeed but if every country does this the world has put all its eggs in one basket. To avoid that, you need some global coordination. One country invests in Vaccine A, the other invests in Vaccine B and they agree to share capacity regardless of which vaccine works.
So my critique is that OWS is good policy but it would be even better if more vaccine candidates and more diverse vaccine candidates were part of the program. In contrast, the critiques being offered in Congress are ridiculous and dangerous.
Democrats in Congress are already seeking details about the contracts with the companies, many of which are still wrapped in secrecy. They are asking how much Americans will have to pay to be vaccinated and whether the firms, or American taxpayers, will retain the profits and intellectual property.
How much will Americans have to pay to be vaccinated??? A lot less than they are paying for not being vaccinated! The worry about profits is entirely backwards. The problem is that the profits of vaccine manufacturers are far too small to give them the correct social incentives not that the profits are too large. The stupidity of this is aggravating.
Skepticism about Trump administration policies is understandable but I am concerned that one of the best things the Trump administration is doing to combat the virus will be impeded and undermined by politics.
The post below, Police Union Privileges, from 2018 is worth revisiting. As I wrote in a follow-up, police union privileges are only one part of a system and reform requires system-thinking. Nevertheless, getting rid of these special privileges, including so-called qualified immunity and restoring the equal rule of law are good places to start. Need I also mention that police should not keep fines and forfeitures–the negative consequences of which I documented in To Serve and Collect, my paper with Makowsky and Stratmann.
Earlier I wrote about how police unions in some parts of the country (especially common in NJ and NY, yet a firing offense in some other jurisdictions, edit 2020) give to every officer dozens of “get out of jail” cards to give to friends, family, politicians, lawyers, judges and other connected people. The cards let police on the street know that the subject is to be given “professional courtesy” and they can be used to get out of speeding tickets and other infractions. Today, drawing on the Police Union Contracting Project, I discuss how union contracts and Law Officer “Bill of Rights” give police legal privileges that regular people don’t get.
In 50 cities and 13 states, for example, union contracts “restrict interrogations by limiting how long an officer can be interrogated, who can interrogate them, the types of questions that can be asked, and when an interrogation can take place.” In Virginia police officers have a right to at least a five-day delay before being interrogated. In Louisiana police officers have up to 30 days during which no questioning is allowed and they cannot be questioned for sustained periods of time or without breaks. In some cities, police officers can only be interrogated during work hours. Regular people do not get these privileges.
The key to a good interrogation is that the suspect doesn’t know what the interrogator knows so the suspect can be caught in a lie which unravels their story. Thus, the Florida Police Bill of Rights is stunning in what it allows police officers:
The law enforcement officer or correctional officer under investigation must be informed of the nature of the investigation before any interrogation begins, and he or she must be informed of the names of all complainants. All identifiable witnesses shall be interviewed, whenever possible, prior to the beginning of the investigative interview of the accused officer. The complaint, all witness statements, including all other existing subject officer statements, and all other existing evidence, including, but not limited to, incident reports, GPS locator information, and audio or video recordings relating to the incident under investigation, must be provided to each officer who is the subject of the complaint before the beginning of any investigative interview of that officer.
By knowing what the interrogators know, the suspect can craft a story that fits the known facts–and the time privilege gives them the opportunity to do so.
Moreover, how do you think complainants feel knowing that the police officer they are complaining about “must be informed of the names of all complainants.” I respect and admire police officers but frankly I think this rule is dangerous. Would you come forward?
How effective would criminal interrogations be if the following rules held for ordinary citizens?
The law enforcement officer or correctional officer under interrogation may not be subjected to offensive language or be threatened with transfer, dismissal, or disciplinary action. A promise or reward may not be made as an inducement to answer any questions.
What does it say about our justice system that the police don’t want their own tactics used against them?
In the United States if you are arrested–even for a misdemeanor or minor crime, even if the charges are dropped, even if you are found not guilty–you will likely be burdened with an arrest record that can increase the difficulty of getting a job, an occupational license, or housing. But even in the unlikely event that a police officer is officially reprimanded many states and cities require that such information is automatically erased after a year or two. The automatic erasure of complaints makes it difficult to identify problem officers or a pattern of abuse.
Louisiana’s Police Officer Bill of Rights is one of the most extreme. It states that police have the right to expunge any violation of criminal battery and assault and any violation of criminal laws involving an “obvious domestic abuse.” Truly this is hard to believe but here is the law (note that sections (2)(a) and (b) do not appear, as I read it, to be limited to anonymous or unsubstantiated complaints).
A law enforcement officer, upon written request, shall have any record of a formal complaint made against the officer for any violation of a municipal or parish ordinance or state criminal statute listed in Paragraph (2) of this Subsection involving domestic violence expunged from his personnel file, if the complaint was made anonymously to the police department and the charges are not substantiated within twelve months of the lodging of the complaint. (2)(a) Any violation of a municipal or parish ordinance or state statute defining criminal battery and assault. (b) Any violation of other municipal or parish ordinances or state statutes including criminal trespass, criminal damage to property, or disturbing the peace if the incident occurred at either the home of the victim or the officer or the violation was the result of an obvious domestic dispute.
In an excellent post on get out of free jail cards, Julian Sanchez writes:
…beyond being an affront to the ideal of the rule of law in the abstract, it seems plausible that these “get out of jail free” cards help to reinforce the sort of us-against-them mentality that alienates so many communities from their police forces. Police departments that want to demonstrate they’re serious about the principle of equality under the law shouldn’t be debating how many of these cards an average cop gets to hand out; they should be scrapping them entirely.
Equality under the law also requires that privileges and immunities extend to all citizens equally.
I was asked by the LATimes to contribute to a panel on economic and pandemic policy. The other contributors are Joseph E. Stiglitz, Christina Romer, Alicia H. Munnell, Jason Furman, Anat R. Admati, James Doti, Simon Johnson, Ayse Imrohoroglu and Shanthi Nataraj. Here’s my contribution:
If an invader rained missiles down on cities across the United States killing thousands of people, we would fight back. Yet despite spending trillions on unemployment insurance and relief to deal with the economic consequences of COVID-19, we have spent comparatively little fighting the virus directly.
Testing capacity has slowly increased, but where is the national program to create a dozen labs each running 200,000 tests a day? It’s technologically feasible but months into the crisis, we have only just begun to spend serious money on testing.
We haven’t even fixed billing procedures so we can use the testing capacity that already exists. That’s right, labs that could be running tests are idle because of billing procedures. And while some parts of our government are slow, the Food and Drug Administration seems intent on reducing America’s ability to fight the virus by demanding business-as-usual paperwork.
Operation Warp Speed is one of the few bright spots. Potential vaccines often fail and so firms will typically not build manufacturing capacity, let alone produce doses until after a vaccine has been approved. But if we follow the usual procedure, getting shots in arms could be delayed by months or even years.
Under Operation Warp Speed, the government is paying for capacity to be built now so that the instant one of 14 vaccine candidates is proven safe and effective, production will be ready to go. That’s exactly what Nobel-prize winning economist Michael Kremer, Susan Athey, Chris Snyder and I have recommended. It might seem expensive to invest in capacity for a vaccine that is never approved, but it’s even more expensive to delay a vaccine that could end the pandemic.
Relief payments can go on forever, but money spent on testing and vaccines has the potential to more than pay for itself. It’s time to fight back.
Alex Tabarrok is a professor of economics at George Mason University and a member of the Accelerating Health Technologies With Incentive Design team.
My point about not fighting the virus directly was illustrated by many of the other panelists. Joseph Stiglitz, Christina Romer, Alicia Munnell, Jason Furman, James Doti, and Shanthi Nataraj say nothing or next to nothing about viruses. Only Anat Admati, Simon Johnson, Ayse Imrohoroglu get it.
Admati supports a Paul Romer-style testing program:
Until effective vaccines and therapies are available, which may be many months away, our best approach is to invest heavily in increasing the capacity for testing many more people and isolating those infected.
Simon Johnson argues, in addition, for antibody tests (not the usual PCR tests):
Policymakers should go all-in on ramping up antibody testing, to determine who has been exposed to COVID-19. Such tests are not yet accurate enough to determine precise immunity levels, but the work of Michael Mina, an immunologist and epidemiologist at Harvard, and others demonstrates that using such tests in the right way generates not just information about what has happened but, because of what can be inferred about underlying disease dynamics, also the information we need to understand where the disease will likely next impact various local communities.
Imrohoroglu advocates for targeted lockdown:
In addition to CDC recommendations about social distancing and public health strategies for all, I believe that as we reopen, we should keep a targeted lockdown policy in place for at-risk groups.
Christo and Jeanne-Claude, true visionaries among many fakes.
Enrico Spolaore on his friend, co-author, and mentor Alberto Alesina:
I first met Alberto thirty years ago at Harvard, where he had received his Ph.D. in Economics in 1986, and had returned as faculty, after a couple of years at Carnegie-Mellon. He was already deservedly famous. In 1988, The Economist had presciently picked him as one of the decade’s eight best young economists, as he was transforming the way we approach macroeconomics and economic policy by explicitly bringing politics into the analysis. In his influential contribution to the NBER Macroeconomics Annual 1988, he had forcefully stated that “social planners do not exist.” Economists should not just assume that governments would implement optimal policies (presumably following the economists’ own recommendations). Instead, we should strive to understand actual policies as resulting from the strategic interactions of partisan politicians with each other and with the public, and often leading to socially inefficient outcomes.
Exactly right. Alesina was one of the most important scholars extending and integrating public choice, especially to macroeconomic questions.
I’ve been working with Michael Kremer, Susan Athey, Chris Snyder and others to design incentives to speed vaccines and other health technologies. AcceleratingHT is our website and now features a detailed set of slides which explain the calculations behind our global plan. The global plan is similar in style to the US plan although on a larger scale. The key idea is that the global economy is losing $350 billion a month so speed pays. One way to speed a vaccine is to invest in capacity for 15-20 vaccine candidates before any candidates are approved, so that the moment a candidate is approved we can begin production (one can store doses in advance of approval). Most of the capacity will be wasted but that is a price worth paying. As Larry Summer says if you will die of starvation if you don’t get a pizza in two hours, order 5 pizzas. Human challenge trials are another way to speed the process.
A global plan is ideal since there are significant benefits to coordination. If each country invests in vaccines independently they will each choose the vaccine candidates most likely to succeed but that means all our eggs are a few baskets. There are over 100 vaccine candidates and they have different scientific and production risks so you want to choose the 15-20 which maximize the probability of success for the portfolio as a whole. To do that efficiently you need countries to agree that ‘I will invest in lots of capacity (more than I need) in candidate X if you invest in lots of capacity (more than you need) for candidate Y’, even knowing that the probability that X succeeds may be less than that of Y.
Vaccine nationalism is making a global plan look unlikely but if each country invests in multiple candidates around the world, as Operation Warp Speed is doing, and if each country guarantees to uphold contracts, we can reach a similar solution.
At AcceleratingHT you can also find our Incentive Design App which computes the optimal vaccine program given user chosen parameters. A big shout out to Juan Camilo Castillo, a newly graduated PhD student from Stanford, who put in a lot of heavy lifting on the app. We have been working on these models under time pressure and I will never forget the late night/early morning zoom calls where Michael Kremer would call out, “I think we need to take into account factor X. What effect would that have?” and Camilo would respond “Give me 5 minutes!” and, as we debated other factors Y and Z, Camilo would hack-away changing parameters and rewriting code till he had an answer. Hire a rising star while you can!
Barrons: General Electric stock was racing higher Tuesday, but not because of anything the company did or announced. Recent Covid-19 vaccine news is serving as a catalyst, and every stock these days feels like a vaccine stock.
Indeed, every stock is a vaccine stock. When vaccines or other treatments do well, all stocks do well which is why stock prices are now highly correlated:
Bloomberg: From beginning the year with a correlation of 0.19, the gauge of how closely the top stocks in the S&P 500 move in relation to one another spiked to 0.85 in mid-March, toward the peak of the coronavirus sell-off before leveling off around 0.8. A maximum possible correlation of 1.0 would signify all stocks are moving in lockstep.
It’s not surprising that when Moderna reports good vaccine results, Moderna does well. It’s more surprising that Boeing and GE not only do well they increase in value far more than Moderna. On May 18, for example, when Moderna announced very preliminary positive results on its vaccine it’s market capitalization rose by $5b. But GE’s market capitalization rose by $6.82 billion and Boeing increased in value by $8.73 billion.
A cure for COVID-19 would be worth trillions to the world but only billions to the creator. The stock market is illustrating the massive externalities created by innovation. Nordhaus estimated that only 2.2% of the value of innovation was captured by innovators. For vaccine manufacturers it’s probably closer to .2%.
Who can internalize the externalities? Moderna clearly can’t because if they could then on May 18 Moderna would have increased in value by $20.52b ($4.97b+$6.82b+$8.73b) and GE and Boeing wouldn’t have gone up at all. Massive externalities.
A clever institutional investor like Blackrock or Vanguard could internalize some of the externalities by encouraging Moderna to work even faster and invest even more, even to the extent of lowering Moderna’s profits. Blackrock would more than make up for the losses on Moderna by bigger gains on other firms in its portfolio. Blackrock does indeed understand the incentives, although its unclear how much beyond jawboning they can actually do, legally.
I’d like to see more innovation in mechanisms to internalize externalities–perhaps in a pandemic vaccine firms should be given stock options on the S&P 500. Until we develop those innovations, however, the government is the best bet at internalizing the externality by paying vaccine manufacturers to increase capacity and move more quickly than their own incentives would dictate. Billions in costs, trillions in benefits.
In Why Human Challenge Trials Will Be Necessary to Get a Coronavirus Vaccine I asked, “What if we develop a vaccine for COVID-19 but can’t find enough patients–healthy yet who might get sick–to run a randomized clinical trial?” Exactly that problem is now facing the Oxford vaccine in Britain.
An Oxford University vaccine trial has only a 50 per cent chance of success because coronavirus is fading so rapidly in Britain, a project co-leader has warned.
…Hill said that of 10,000 people recruited to test the vaccine in the coming weeks — some of whom will be given a placebo — he expected fewer than 50 people to catch the virus. If fewer than 20 test positive, then the results might be useless, he warned.
As I wrote, “A low infection rate is great, unless you want to properly test a vaccine.” Challenge trials have issues of external validity and they take time to setup properly but they produce results quickly and they can be especially useful in whittling down vaccine candidates to focus on the best candidates.
1DaySooner now has over 25 thousand volunteers from over 100 countries.
Bloomberg: As sections of the global economy tip-toe toward reopening, it’s becoming clearer that a full recovery from the worst slump since the 1930s will be impossible until a vaccine or treatment is found for the deadly coronavirus.
Consumers will stay on edge and companies will be held back as temperature checks and distancing rules are set to remain in workplaces, restaurants, schools, airports, sports stadiums and more.
China — the first major economy consumed by the virus and the first to emerge on the other side — has been able to revive production but not demand. The lesson for other economies: it’ll be a stop-start path back toward normal.
There’s also the risk of new flare-ups. Some 108 million people in China’s northeast region have been put back under varying degrees of lockdown amid a new cluster of infections. Doctors there are also seeing the coronavirus manifest differently, suggesting that it may be changing in unknown ways.
In South Korea – where the virus was controlled without a hard lockdown – consumer spending remains weak as infections continue to pop up.
…Harvard University professor Carmen Reinhart, who is the incoming chief economist of the World Bank, had a similar message. “We’re not going to have something akin to full normalization unless we (a) have a vaccine and (b) — and this is a big if — that vaccine is accessible to the global population at large,” she told the Harvard Gazette.
The virus is being beaten back and there are reasons for optimism but I agree with Reinhart that we won’t get full normalization without a vaccine. The world economy is on the order of $90 trillion and the IMF is projecting a 3% decline instead of an expected 3.3% increase so a loss to the world economy of around $6 trillion in 2020. Growth will probably return in 2021 and there will be some catchup but the IMF projects a cumulative loss of 9 trillion. Ending the pandemic early could generate hundreds of billions, even trillions, in output–that’s why Susan Athey, Nobel laureate Michael Kremer, Chris Snyder and myself advocate for going big on vaccines. It’s billions in costs and trillions in benefits. Warp speed ahead!
In Adam Smith there is the pin factory and the market and from that beginning we trace the long literature in economics focused on the twin questions, What price to set? How much to produce? Following Coase, Williamson asks different questions, Why a pin factory? Why are the 18 steps to make a pin performed by a single firm rather than two or more? Why are there many firms instead of one large firm? Why does the pin factory not vertically integrate upwards to buy the steel factory and downwards to buy the retail hardware shop?
Williamson’s answers rest on the notions of bounded rationality, contract incompleteness, asset specificity and opportunism. Start at the end, asset specificity and opportunism. When a deal has been sealed the parties typically move from having many potential partners to being locked in. That’s bad because it raises the possibility of opportunism–one party can exploit the other. But it’s also good because when the lock-in is credible each party may be more willing to invest in assets which are extra-productive but specific to the relationship.
Marriage, for example, takes away some possibilities but it adds others. With marriage, for example, comes a greater willingness to invest in children (n.b. asset specificity, the child is of extra value but only to the specific parties involved in the marriage) but that very benefit also means that one of the parties has the leverage to be opportunistic. Knowing all of this when they enter the contract the parties bargain ex-ante, they exchange promises and make investments (the ring), they establish rules for ex-post bargaining or decide on the background rules to apply in that eventually (pre-nup, no fault divorce, covenant marriage). The rules are never perfect and the contacts are always incomplete.
Transaction cost economics is all about applying these ideas in different settings to figure out the best governance structures (marriage, vertical integration etc.) in different circumstances. How does one deal with expensive investments (such as highly individual dies or plant construction) that are specific to a given
trade and put the investor at risk yet which increase productivity? Williamson analyzes how firms come to rely on long term contracts or vertical integration or other seemingly non-competitive solutions to enhance market productivity. Early generations of antitrust enforcers often saw these as monopolistic dealings, but scholars such as Williamson helped us understand how these are essential to the workings of the invisible hand.
Williamson’s paper, The Economics of Governance is an excellent recent summary of his views in the area.
Williamson’s work is notable for inspiring a large body of empirical and theoretical work in modern industrial organization and having influence in law, political science, and management. His work has been widely cited, and by some counts he was the most widely cited economist in the world.
I especially thank John Nye who contributed to this post.
Alan Merten, former President of GMU, has died after a battle with Parkinson’s disease. I got to know Alan just a little when we visited China together in 2008. Our visit was part of GMU’s 1+2+1 program in which students in China earned their degree by doing 1 year at a partner university in China, 2 years at GMU and then a final year in China. We were touring the partner universities to participate in their graduation ceremonies. It was a great trip. I visiting the Great Wall, stayed in a Hutong in Beijing, and visited Kunming in Yunan province.
I also found it exhausting as we traveled from graduation ceremony to graduation ceremony. One night at the beginning of another such ceremony I said to Alan “I guess your job is to go to a lot of these events” and he turned to me beaming and full of energy and said “Oh yes, I love seeing the students so happy and their parents so proud. It’s the best part of my job.” And he meant every word. I’ve never forgotten that. He was a good university president.
ISAs provide students with funding to cover their education expenses in exchange for a portion of their income once they start working. Under a typical contract, recipients pledge to pay a fixed percentage of their incomes for a set period of time up to an agreed cap. For example, a student who has $10,000 of his or her tuition covered through an ISA might agree to repay 5 percent of his or her monthly income for the next 120 months (10 years), up to a maximum of $20,000. ISAs typically also have a minimum income threshold before payments kick in; if the recipient earns less than the minimum, he or she pays nothing. This means that ISAs offer students more downside protection than a traditional loan.
This downside protection is what attracted Andrew Hoyler to Purdue’s “Back a Boiler” ISA program, which launched in the fall of 2016. Hoyler, who graduated from Purdue’s professional flight program in 2017, signed up for Back a Boiler in his senior year. He received $21,263 in reduced tuition and flight fees in exchange for agreeing to repay 7.83 percent of his monthly income for 104 months, or until he had paid back 2.5 times the amount he originally received. Now a pilot for PSA Airlines, a subsidiary of American Airlines, he has been making payments on his ISA for about 30 months.
…Hoyler is particularly grateful to have that safety net now, as the airline industry is being rocked by the COVID-19 outbreak. “The ISA is giving me a sense of relief. If I find myself furloughed, my payments stop with zero interest,” he says.
Kominers, Pathak, Sonmez, and Unver apply market design tools to incentivize convalescent therapy:
COVID-19 convalescent plasma (CCP) therapy is currently a leading treatment for COVID-19. At present, there is a shortage of CCP relative to demand. We develop and analyze a model of centralized CCP allocation that incorporates both donation and distribution. In order to increase CCP supply, we introduce a mechanism that utilizes two incentive schemes, respectively based on principles of “paying it backward” and “paying it forward.” Under the first scheme, CCP donors obtain treatment vouchers that can be transferred to patients of their choosing. Under the latter scheme, patients obtain priority for CCP therapy in exchange for a future pledge to donate CCP if possible. We show that in steady-state, both principles generally increase overall treatment rates for all patients|not just those who are voucher-prioritized or pledged to donate. Our results also hold under certain conditions if a fraction of CCP is reserved for patients who participate in clinical trials. Finally, we examine the implications of pooling blood types on the efficiency and equity of CCP distribution.
The idea is quite similar to the “no give, no take” rule for organ donation that I have promoted for many years. Namely, if you don’t sign your organ donor card you go to the back of the queue should you ever need an organ donation. Israel adopted the idea some years ago by giving points to people who signed their organ donor card. As with no-give, no-take, the point of the rules that Kominers et al. promote isn’t fairness per se but rather as an incentive to increase donations and thus increase the supply of plasma.