Operation Warp Speed for X?
Large scale government spending programmes drove vaccine production and rollouts. Could this method work elsewhere?
It is estimated that by the end of 2021, vaccines had saved the global economy $17 trillion dollars. This mind-boggling figure is a testament to Operation Warp Speed, a public-private partnership that accelerated the development, manufacturing and distribution of COVID vaccines and therapeutics.
People are now holding up Operation Warp Speed as an example of where government funding programmes can drive progress. But where could it work, and where couldn’t it?
On the opp’s block
The economic rationale behind Operation Warp Speed is as follows.
Ordinarily, a vaccine manufacturer will not be willing to build a factory to create a vaccine until after they have been proven to work and approved - this takes years. But we did not have years.
Therefore, Operation Warp Speed guaranteed sales for approved vaccines, where the government paid firms to run trials, got bodies like the FDA approval to run trials concurrently, and paid firms to start building vaccine manufacturing plants immediately.
The firms built factories even before they knew if the vaccine was going to be successful. Such a process of guaranteeing payment before a vaccine is available is what is known as an Advanced Market Commitment (AMC).
This was a crucial economic step. The moment a vaccine was approved - the manufacturing plants were ready to go.
Initially a US model proposed by Robert Kadlec and Peter Marks (and authorised by then-President Trump), AMCs for vaccines were replicated in places such as the UK.
AMCs had previously been proved to work for the Pneumococcal virus - but the evidence base that emerged from Operation Warp Speed dwarfed its descendants.
The success of this programme has prompted people to think that OWS should be replicated for other endeavours. Recent op-eds titled “We need an Operation Warp Speed for clean indoor air” and “We need an Operation Warp Speed for kids mental health” showcase this desire to rescript a key pandemic policy tool in other domains.
Yet Alex Tabarrok, one of the economists that backed OWS early doors, is sceptical of this approach.
The card-carrying free market economist said in a great post on Marginal Revolution:
”Many people, however, are concluding from the success of OWS that big Federal funding can solve many other problems at the same speed and scale and that is incorrect.”
Tabarrok states that OWS did not actually create any new scientific innovations. Even when it came to mRNA vaccines, the bulk of the work on this had been completed by Moderna and BioNTech with the help of universities and government funding over decades. In Tabarrok’s eyes, what really shifted the dial, along with this new, unprecedented funding stream, was removing unnecessary bureaucracy in order to scale a response to an urgent problem.
Tabarrok details other key drivers of OWS in the above blogpost, but I want to dwell on what he sees as what we would need to replicate OWS in another problem area.
“So summarizing what do we need for another OWS? 1) Known science--scaling not discovering, 2) Lifting of regulations 3) Big externalities, 4) Pre-existing motivation.”
Using this framework, I will suggest three new areas where OWS could be replicated; Nuclear small modular reactors; Covid treatment pills; and empty homes.
Nuclear small modular reactors (SMRs)
Small modular reactors offer a lower initial capital investment and greater scalability for locations unable to accommodate more traditional, larger reactors. Being smaller, they can also be built more quickly than traditional reactors - which is one of the better criticisms that is sometimes levelled at nuclear. Given the need to rapidly decarbonise, SMRs offer a way of building a net zero infrastructure that arrives on time.
Known science – scaling not discovering. SMRs are already used in the likes of Argentina, Canada, China, Russia, South Korea and the United States.
Lifting of regulations. For all the speed at which SMRs can be built, they still take years for approval. One key explanation for this is due to the perverse incentives that exist in regulators like the US Nuclear Regulatory Commission. This is from a Jason Crawford review of the book “Why has nuclear power been a flop?”
“Their budget does not increase proportional to gigawatts generated. Instead, the nuclear companies themselves pay the NRC for the time they spend reviewing applications, at something close to $300 an hour. This creates a perverse incentive: the more overhead, the more delays, the more revenue for the agency.
The result: the NRC approval process now takes several years and costs literally hundreds of millions of dollars.”
It is right that nuclear power risk is managed accordingly, but this is staggering. Turning these incentives on their head would do away with a large amount of the unnecessary delay that is being burdened on one of the most valuable parts of the energy sector.
Big externalities. The externalities (third party costs) that come from the climate crisis need little description. Here, COVID parallels can be drawn extremely well. Acting early with a lot of money may be expensive in the short run, but it sure will be less costly than the bill you would fit in the long run if you are not initially proactive.
Pre-existing motivation. There was some motivation from politicians to explore nuclear as an alternative energy source, though it hasn’t received the attention it deserves.
However, in the last year or so, two things have changed. The first is that in 2021, venture investors plowed $3.4bn into nuclear startups, which according to PitchBook, is more than in every year over the past decade combined.
The second fundamental change is down to the geopolitics of energy amidst Russia’s invasion of Ukraine. The likes of Germany are now considering rowing back on their disastrous nuclear plant closing spree, with Macron also announcing the development of new plants.
COVID pharmaceutical drugs
COVID is here to stay. Whilst vaccines will (eventually) get in the arms of everyone who needs one, scaling production to deal with emergent variants will be hard, though is something I have previously advocated for.
Alongside this, we need to scale for drugs that can treat people once they are infected. Participants in a trial given the pill Paxlovid were 89% less likely to develop severe illness/death compared to the Placebo group. Once again, like with vaccines, AMCs could address the risk to manufacturers that comes about from the long approval process.
Known science – scaling not discovering. We have anti-covid drugs, and are getting more familiar with the virus, even as it changes, by the day.
Lifting of regulations. The data for Paxlovid was released in the BMJ in early November 2021. Next week, 6 months after this data release, Paxlovid will be available to Americans in high-risk groups only. This is part of the Paxlovid Paradox, which I have also previously blogged about. It is clear that regulations could also be removed here.
Big externalities. Once again, the positive externalities that could come from significantly reducing the impact of COVID on hospitalisations and wellbeing are enormous
Pre-existing motivation. Again, similar to vaccines, there is a moderate public health apparatus available to many states with staff/citizens that are incredibly keen to prevent future pandemics.
Creating more empty homes
Across England, 0.9% of homes are long-term vacant. The equivalent number for France is 8.2%. Such a lack of empty dwellings signals a major policy problem in the housing sector.
Initially, this may sound wasteful. But empty homes actually perform several valuable functions.
First, they will make housing more affordable by increasing the choice of prospective buyers. This extra choice also enables labour markets to be more flexible - people will be more likely to move to a different part of the country for a job and lifestyle that suits them and their family.
Secondly, it will enable much more resilience in the times of crisis. For example, it would make it more likely that schemes to get homeless people basic necessities to be approved in parliament, as they wouldn’t be seen to be taking away from tax-paying (and importantly to politicians, voting) constituents. An abundance agenda should be something we do not shy away from.
The Ukrainian refugee crisis is another reminder of the political choices we will face for decades to come. Given the inevitable political issue of climate refugees becoming increasingly prevalent, industrialised nations have an obligation to support displaced communities that feel the brunt of climate systems breakdown. Having a healthy supply of empty homes could help improve the integration of these refugees into society.
AMCs that guarantee that the government will pay developers of empty homes could be part of the solution. The state could then auction off homes when there is sufficient demand, or broker a sale through a third party.
Known science – scaling not discovering. We know how to build homes. We also know how to build beautiful homes. AMCs could create a much clearer parameter for the kind of homes being built, both to create aesthetic value and generate buy-in from local NIMBYs.
Lifting of regulations. Planning reform is one of the major blockers to building more, and reforming this could not just increase the supply of empty homes, but also the supply of homes throughout the country.
Big externalities. As outlined in the seminal Housing Theory of Everything, solving our housing supply problem would generate a seismic positive shifts in productivity, equality, climate, and health amongst other things.
Pre-existing motivation. Despite NIMBYs being a powerful lobby, there is significant consensus that more houses need to be built (see my blog on the end of NIMBYism). Smart politicians and policy-makers at the very least recognise there is a housing crisis, even if they aren’t putting in enough effort. The challenge here would be persuading people that the empty homes problem has the same underlying root cause as the housing crisis writ large. As Tom Forth explains, this is partly true. He notes however, that countries like France have set national and regional targets of the % of homes that must be empty, increasing that number by increasing supply. In the UK, we approach it from the other end, insisting we should reduce our % of empty homes by doing better centrally planned matching of occupant to home. Build more homes now!
I hope that this model could generate consensus across political tribes. Indeed, when you have wicked smart free-marketeers like Tabarrok essentially saying to governments, ‘you need to throw money at this’ (like he did with OWS), that might tell you something about the overwhelming economic incentives at play.
But I wouldn’t hold out on this model becoming widespread. Even the amount spent on Operation Warp Speed was barely 10% of what was suggested by Kadlec and Marks, and that was on an event when the short term externalities were arguably far greater than anything else that I have suggested.
Nevertheless, even one Operation Warp Speed-like response a decade could make humanity so much better - or at least make it suck less.
Of the Week - My Favourites
Podcast: BBC - The End of Invention
Sam Bowman just doesn’t miss. His podcast looks at whether we are slowing down in generating new ideas and products, what this might mean, and why we need a “science of science”. These are themes I covered in my interview with Michael Bhaskar.
Youtube Video: Cleo Abraham - The hidden reason we need more clean energy, fast
Song: Nubya Garcia - Pace (Moses Boyd Remix)
Article: Financial Times - War with Russia? Finland has a plan for that
Phenomenal profile on the crisis preparedness of the Finnish government for events such as pandemics and nuclear war. It is free to read because you must.