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I am reading many people claim something like “production and distribution of the vaccine is the constraint, not FDA approval.”

There are multiple mistakes in such a view, and here I wish to focus on the logic of constraints rather than debate the FDA issue.

First, there are vaccines available right now, and it helps some people (and their contacts) to have those distributed sooner rather than later.

Second, easing the FDA constraint encourages the suppliers and distributors to hurry to a greater degree.  Just imagine if the FDA were to take a few months longer to approve.  The more general point is that citing “x is right now the main constraint right now” does not mean “the elasticity of x is zero.”

“Sure” wrote in the comments:

On the economics side, I am not convinced that production has ramped up as full and as fast as possible. After all there is some risk premium for expanding plants, running constant shifts, etc. and the danger of delayed approval, particularly if you are in some (mostly negligible) way to the other vaccines may not warrant the investment.

After all, approvals appear to move stocks. Do we really think the market is that dumb? If approval has an impact on market value, why exactly would it not also have an impact on the cost of borrowing, expanding, etc.? Surely somebody believes that approval will result in something different will happen than was happening the day before.

Third, “FDA vaccine approval” is a complementary good for the final vaccine service, strongly complementary in fact.  If the other complementary infrastructure goods have price/quality combinations that are “too disadvantageous,” the theory of the second best implies that approval processes should be speedier and more lax than you otherwise might have thought.  This is just the converse of the classic result that multiple medieval princes imposing multiple tolls on a river create negative externalities for both river users and each other.  Lower those tolls wherever you can.

Fourth, let’s say there were three constraints, each absolutely binding at the current margin.  Speeding FDA approval, taken alone, would have absolutely no effect.  We then ought to be obsessed with identifying and remedying the other two constraints (along with approval)!

But we are not.  Instead we keep on citing those (supposed) constraints in defeatist fashion.  This absence of obsession with easing constraints is in fact one of the biggest reasons for thinking we can do better.  We need to throw more money and talent at these problems, and we are not working hard enough on how to do that.  We are just citing the constraints back and forth to each other and pleading helplessness.

As a final note, I recall that my recently deceased colleague Walter E. Williams was especially good on these issues.  I recall him once saying he wanted to hire a helicopter to drop a cow into the campus central quad, just to show people that supply has positive elasticity.  “I’m going to call them up and say “Williams wants a cow!””

Moo.

Many people are asking me this question.  I don’t mean to relitigate the question of whether the FDA should be moving faster, rather consider this an exercise in how to think about the trade-offs.  I thus am going to hold the safety and quality of the vaccine constant.

To proceed, consider the distinction between processes defined by economic time and processes defined by calendar time.  In Virginia it may snow in February but not in October, and that is defined by calendar time, not caused by local gdp.  But for many inventory processes, they do not restock until the shelf is emptied by buying customers, and that is economic time.  They don’t check to see if it is June or July.

Let us say that only economic time matters, though I will drop that assumption shortly.

Now, given how late we are in “the season,” it is easier to think about pushing the approval date back rather than moving it forward.  Let’s say that the FDA postponed the December 10 meeting to January 10.  Some number of people would die of Covid during that month — the current clip being around 2600 a day but changing — and then around Jan.10 some kind of vaccine-related health and economic recovery would move into fuller gear.

If only economic time matters, it seems the Dec.10 recovery and the Jan.10 recovery run about the same.  The net difference between the two scenarios is the lives lost in the meantime, to oversimplify say 2000 x 30 days, or 60,000 lives plus accompanying lost jobs and gdp.

I do not think that losing those lives would somehow speed the later, Jan.10-starting recovery process, and it may in some ways render it more fractious.

On top of that, the postponed recovery period likely will imply some kind of grinding uncertainty in the meantime, and possibly intertemporal substitution from some agents (like me!) who are waiting for the change to come before going to the barber. The true net costs are thus higher than what I listed two paragraphs above.

Now, how might the introduction of calendar time alter those estimates?

First, the production of complementary goods for vaccines (say freezers, but the point is more general) may be on a clock of its own, more or less on automatic pilot and requiring time.  When approval comes later, more of those complementary goods are in place, and thus the later recovery is a more powerful one.  That factor tends to lower the cost of delaying approval.

(Of course to the extent those same complementary inputs depend upon economic time, that is reason not to delay approval!  The sooner you approve, the sooner they will get working on getting those freezers in place, which of course boosts recovery power.  Supply is elastic with respect to approval, as suggested for instance by stock market reactions to approval decisions.)

Second, the seasonal effects will differ.  Ideally you want the spread of vaccines to be covering some of the more infectious and thus more difficult winter months.  February is worse than March, and so on.  Given the current clock, this is a big reason to be hurrying.

You might think of other ways calendar time could matter.  You also might think of various non-linear effects and interactions, though I am not sure whether they would make delay more or less costly.

Overall it seems to me that the costs of approval delay are likely very high.  They are not obviously overturned or minimized by citing the relevance of complementary inputs.  The import of complementary inputs might be more ruled by “economic time,” or the seasonal effects may be a stronger quantitative magnitude, again favoring faster speed of approval.

I do understand this is far from a final analysis, rather it is a starting point for conceptualizing the problem.