Decision Making as Output and Bounded Rationality

  The classical economics theories proceed on the assumption of rational agents. Rationality implies the economic agents undertake actions or exercise choices based on the cost-benefit analysis they undertake. The assumption further posits that there exists no information asymmetry and thus the agent is aware of all the costs and benefits associated with the choice he or she has exercised. The behavioral school contested the decision stating the decisions in practice are often irrational. Implied there is a continuous departure from rationality. Rationality in the views of the behavioral school is more an exception to the norm rather a rule. The past posts have discussed the limitations of this view by the behavioral school. Economics has often posited rationality in the context in which the choices are exercised rather than theoretical abstract view of rational action. Rational action in theory seems to be grounded in zero restraint situation yet in practice, there are numerous restra

The Political Decisions and the Corona Vaccine

 

“War is too important to be left to the generals”. This statement is something often talked about and bandied about when discussion arise about international relations. Likewise, the current situation makes it apt to add another adage ‘Pandemic is too important to be left to the doctors”. Without doubt, doctors are the frontline warriors in the battles against the Chinese pandemic that is raging across the globe. It is just not the lives that it has taken that matters but the livelihoods it has disrupted. The light at the end of the tunnel though often comes on the horizon but remains elusive. There is no doubt, patience is wearing thin among the population. Disruption is galore all around. The economic growth is in the negative zone with many economies recording fall in excess of 20% and above. The world is likely to be in recession for more time. The lockdown seems to be generating diminishing returns. It was effective when the disease was confined to few clusters but when it has emerged in the open, the lockdown might not yield the same results. On a positive note however, the world is witnessing a decline in global mortality rate. In India, the case fatality ratio (CFR) has dropped to below 1.9% and is likely to drop further. Even assuming undercounting of deaths, the CFR will drop even further given the possibility of undercounting of cases, something borne about the serosurveys conducted in different places.

 

In the recent past, there have been posts discussing different dimensions of the pandemic. This post talked about the strategizing on the antibody surveys that are being conducted across the country. Another post highlighted the fact that mortality is studied, yet the long term morbidity remains unstudied and unlikely to remain so for some more time. This is because morbidity emerges over time while mortality would be easy to measure and happens in relatively short time. A past post also posited the existence of impossible trinity of the pandemic. It implied, a conservative testing policy, low positivity rate and an open economy all cannot exist simultaneously. In the light of the same, there was an examination of the ICMR testing strategy in this post. There was also a discussion on the prophylaxis and its implications and need for the data of the same in this post.

 

Without doubt, the focus now must be either on the cure or on the vaccine. There has to be a speedy end to the pandemic. At the outset of the pandemic, there was a discussion in this post on the innovation paradigms and how they perhaps hinder the development of cure or vaccine for the disease originating in Wuhan. The vaccine games are essentially an outcome of inter pharmaceutical industry rivalries. The firms are desirous of having their vaccines accepted but would not hesitate to use proxy forces to pull down their rivals. The vaccines are billion dollar games and as such no firm would like to fall behind the same. Thus there seem to be a race to produce the vaccine first. In India, the ICMR had already permitted the launch of trials for three different vaccines. The rationale behind this strategy was elucidated at length in this post.

 

Yet as discussed before, the vaccine games are essentially a play of implied demand uncertainties. The vaccine utility is perhaps till the pandemic exists. The moment pandemic disappears, the need for vaccine disappears. There might be people who might want to have a shot at frequent intervals but the number would be relatively less. Therefore, from a profit perspective, the cycle time for vaccines would be relatively short. In the current pandemic round, the cycle time could even be less than one round. In other words, there might be one round vaccine administration globally. This could take care of the short term. In the event the pandemic doesn’t get reported in the future, the utility of this vaccine would disappear. This is one reason, the vaccine makers are usually reluctant to invest their resources. At the core of their strategy, would be to divert their resources from their existing objectives to research and development of this vaccine as they grapple with the global health crisis.

 

In a recent presentation before a parliamentary panel, the ICMR and other health experts advising the government had suggested the possibility of emergency authorization for the vaccine. There have been meetings between the authorities, the task force and the pharmaceutical firms engaged in vaccine production. In the Independence Day speech, the Prime Minister highlighted the readiness of the Indian government in administering the vaccine in the shortest possible time as it awaits a green signal from the scientists. Similarly President Trump in the US has indicated a possibility of emergency authorization before the November 3 Presidential elections. Russia has already claimed the launch of the vaccine which it terms Sputnik, a reference to the satellite that it launched, the first country on the earth to do so. China seems to have authorized administration of vaccine to its citizens.

 

Yet as the talk over emergency authorization gains steam, dissenting voices have begun emerging all over. There is already considerable scepticism over Russian launch of the vaccine. Given the opacity in China, no one is sure about the status there. In the US, the vaccine has got caught in the middle of domestic politicking as the elections near with the population’s health being the collateral damage. In India, already voices are circulating on how the emergency authorization could jeopardize health. It is just a matter of time before being picked by political leaders notably the self-styled Crown Prince of the leading opposition party. This is where the opening statement comes into the picture. There is no doubt on the need of the effectiveness of the vaccines. There is no doubt on the essence of its safety and immunogenicity. These can be demonstrated in the first and second phase of the trials. If they are confirmed safe, they can be administered on a larger scale. On a experimental basis, HCQ was already offered as prophylaxis for high risk groups though little peer-reviewed data exists. This highlights the paucity of documenting research than of the effectiveness or otherwise of the medicine. Similarly, India has allowed experimental transfusion of plasma for long, something US officially did only a few days back. Therefore in reference to the vaccine too, there needs to be some hard decisions made.

 

If the economy has to turn around, the social disruptions have to be minimized, the education system has to be rebooted, and life has to return to normal at the earliest. It therefore goes without saying the vaccine must not just be approved at the earliest but administered at the earliest. In India, the scale of reaching 1.4 billion population is itself mind boggling. Testing the whole population even once leave at frequent intervals is impossible. Therefore, there exists a strong case for emergency authorization. The phase three of the trials can be expanded to significant scale and as the learning curve gathers steam, the reach too can be expanded. The time to wait for perfect vaccine simply doesn’t exist. Perfection is the enemy of the good. Therefore, the vaccines must proceed. It is a different matter there would be some questions raised on any vaccine and would probably happen at any point of time. In the given context, it is the conviction of the health authorities that matter. If the health authorities are convinced, something they showed during the HCQ issues, the vaccine might roll out very soon. Notwithstanding the reports over the possible dangers, the authorities if convinced on safety in the initial trials, they must be allowed to go ahead. It is about the cost benefit analysis. If the marginal benefits outweigh marginal costs, the vaccine must make its way at the earliest. Procedural and bureaucratic hassles would have too big a price to be paid by the society.

 

 

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