Tag Archives: Public Goods

Market Failure: Ebolanomics

ebolaJames Surowiecki wrote an interesting piece in the New Yorker about the deadly outbreak of Ebola and the fact there is no real medication to stop it. Ebola was discovered in 1976 and although there has been no drug approved to treat the disease this is not surprising.

A pharmaceutical company is a business and they will direct investment into medication that they see will generate income for them which will ultimately satisfy the shareholders. Therefore it makes sense for them to target higher income groups that have the purchasing power to buy the medication. Furthermore it is in their favour that the medication needs to be ongoing e.g. drugs for lowering your cholesterol. Although this works quite well in developed countries it does lead to significant underinvestment in diseases and certain categories of drugs. Ultimately the big pharmaceutical company does not see the developing world as a potential market for their products. Therefore diseases like malaria and tuberculosis receive less attention from companies than high cholesterol. However initially Ebola looked like a bad investment as it was confined to West Africa but as it has now spread to the developed world investment might start to be more prevalent.

The big question that Surowiecki alludes to is how do we get the drugs we need without transforming the industry. One way would be for the government to make a payment to a company and in exchange the company would give up the right to sell the product and therefore save on all the marketing costs. Furthermore public health officials would be able to control how it was promoted and used. Economists see payments as cost-effective as you only have to pay if the product works and it encourages investment into public goods where the benefits extend not only to the consumer but to third parties – e.g. vaccinations etc.

Economics games for the classroom

Following on from Geoff Riley’s blog post (see below) on the Tutor2u site here are the games that he was alluding to.

In this blog I am reprising an article produced by our good friend Mark Johnston from New Zealand in an early edition of the now discontinued Latte Magazine(2007). I am doing so because I know that many colleagues are interested in trying some experimental games with their students for example when teaching game theory, behavioural economics and the provision of public goods.

Click the link for the games in pdf format from the Latte Magazine
winter07-economicsgames

Here is another that I have used recently on Oligopolies.
Oligopoly Game