As an economist, my job is not to help you make health decisions about Covid vaccines. Your health history, age, subjective evaluation of risk, and many other factors make recommendations from me meaningless. I can, however, increase your awareness of distortions that lead to poor decision-making.
I’m not talking about the most apparent distortion—mandates. Mandates alter decision-making, but those who alter their decisions know precisely why their decision was altered. Worse are distortions you do not see; what you don’t see, you have no power to do anything about. Censorship, and anything that restricts the flow of information, leads to suboptimal decisions, and like mandates, censorship will not be the focus of this essay.
The market process for vaccines has been distorted. To recognize the distortions and understand their consequences, let’s begin with an example less charged than vaccines.
Suppose entrepreneur Smith announces that Smith AutoDrive Company has developed a level 5, fully autonomous self-driving car. The car requires no human attention. Smith claimed the company’s trials showed a 100 percent spotless safety record. A new Federal Autonomous-Driving Safety Commission (FADSC) reviewed the evidence and voted to allow these driverless cars on the road.
Sounds good? For a person whose driving skills have been challenged by age, fatigue, addiction, or physical infirmity, Smith’s invention would be a boon.
Let’s add this wrinkle. Smith demands that the government legally indemnify Smith AutoDrive Company and drivers of Smith’s cars from liability should the auto drive technology fail. If the car crashes, the car owner can’t sue Smith AutoDrive Company and others can’t hold the owner of the car responsible for the accident since owners are not drivers. Smith argues that auto-drive technology is essential for increasing highway safety; use of the technology must not be held back by lawsuits. Smith’s demands are granted. The FADSC chair proclaims Smith’s cars are a miracle of modern science. News of car crashes is censored; those warning the technology isn’t as safe as claimed are called conspiracy theorists out to stop automobile progress.
If you say this scenario is unlikely to happen with automobiles, you are probably correct. Yet, it is precisely what has happened with Covid vaccines.
Liability Shields Distort Decisions
Almost 40 years ago, I became interested in the role insurance companies play in regulating safety. I first applied my analysis to the nuclear power industry.
In May 2020, I applied the same framework to Covid vaccine safety and wrote “ Why ‘Operation Warp Speed” Could Be Deadly.’ The essay reports on the liability protection given to Covid vaccine manufacturers under a February 2020 declaration by Alex Azar, who was then Secretary of Health and Human Services.
Azar’s order made all those who “manufacture, distribute, administer, prescribe or use” any Covid treatments or vaccines “immune from suit and liability…to all claims of loss.”
My 2020 essay anticipated how liability shields would distort decisions and increase risk. Shielded from liability and loss, pharmaceutical companies rushed to develop vaccines; standard protocols for development and testing were suspended.
Vaccines have been promoted heavily, even to groups of people at low risk from Covid but higher risk from vaccine side effects. For example, the young adult population is at risk of suffering myocarditis after being vaccinated. Even a very pro-vaccine doctor, Paul Offit, understood the risk and advised his 20-something son to forgo the Covid booster. Yet some colleges mandated a Covid booster to return for spring semester classes. We can be 100% certain pharmaceutical companies would not promiscuously promote vaccines if the companies were not shielded from liability.
Libertarian law professor Richard Epstein has explored the problem of limiting liability. Writing about the 2010 BP oil spill in the Gulf of Mexico, he explained, “The best way to deter future spills is to expose drillers to the full costs of any mistake and not let any company without proper insurance near an oil derrick.”
Insurance companies not captured by government bureaucrats are the best regulators, because insurers are best at assessing risk. Epstein explains:
A tough liability system does more than provide compensation for serious harms after the fact. It also sorts out the wheat from the chaff—so that in this case companies with weak safety profiles don’t get within a mile of an oil derrick. Solid insurance underwriting is likely to do a better job in pricing risk than any program of direct government oversight. Only strong players, highly incentivized and fully bonded, need apply for a permit to operate.
Let’s generalize Epstein’s logic. When pharmaceutical companies are subject to the discipline of obtaining insurance coverage, the companies are highly incentivized to produce the safest vaccines.
The case against liability shields is not a case against vaccines; it is a case against the distorted production and promotion of vaccines. Limits on liability override the risk-reducing incentives provided by having to pay insurance premiums. The result is that vaccines are less safe than they would otherwise be.
In summary, the best way to ensure vaccine safety is to expose pharmaceutical companies to the full costs of any mistake, and not let any company without proper insurance near a human body.
Insurance companies are impartial regulators that do not cut corners. There is no revolving door between insurance companies’ employees and Big Pharma employees. Company shareholders and bondholders, too, are regulators. Without liability protection, a vaccine with a poor safety profile is a poor investment, so it is less likely to come to market.
My essay of 2020 warned of possible vaccine mandates, and many economists rightfully opposed them. As late as 2021, warnings of coming mandates were called disinformation. Yet, warnings of the consequences of shielding Big Pharma from liability went unnoticed.
Many Americans were seduced by the promise of an instant solution to the pandemic. Get the jab and life will return to normal. Get enough people vaccinated and the virus will be eliminated.
Regulatory Capture
Crony interests capture government regulation and oversight. Well-documented are financial ties of government officials and pharmaceutical companies as well as the revolving door between government officials and employees of pharmaceutical companies.
Stéphane Bancel, CEO of Moderna, recently revealed Moderna’s close relationship with the CDC: “[There’s] always been a great partnership between public health experts, the regulators and the vaccine makers, to figure out what’s the best path. As Tony said, for two years we’ve all worked literally seven days a week together to figure out how to fight this common enemy of the virus.” The “great partnership” benefits pharmaceutical companies because it is cheaper to capture regulators than to manufacture a safe vaccine that insurance companies would underwrite.
In his article “Competition as a Discovery Procedure,” Friedrich Hayek observed, “In sporting events, examinations, the awarding of government contracts, or the bestowal of prizes for poems, not to mention science, it would be patently absurd to sponsor a contest if we knew in advance who the winner would be.” That’s exactly what government did. Even though there has never been a successful coronavirus vaccine, vaccines were declared the winning strategy to end the pandemic.
Cloaked in the mantle of “the science,” regulators and Big Pharma have subjected the public to continuous misstatements. Tony Fauci’s 2021 whopper declared that the vaccinated are “a dead end to the virus.” In 2021, the CDC director Rochelle Walensky was still spreading Big Pharma’s propaganda: “vaccinated people do not carry the virus, don’t get sick.” Dr. Fauci was still holding out the promise of “elimination” of Covid.
Given the constant distortion of information and false promises coming from Big Pharma and their regulators, we can hardly blame those who thought vaccines were a simple solution to the pandemic.
Unseen Effects
Let’s pursue the unanticipated effects of shielding Covid vaccine manufacturers from liability. Enshrining vaccines as the way to deal with the pandemic shut down discovery of alternatives. Enshrining ineffective remdesivir as one of the only treatments for hospitalized Covid patients also blocked the discovery process.
When Covid vaccines, shielded from liability, were brought to market, research and development dollars went into vaccines rather than therapeutics. Again, my job as an economist is not to evaluate the evidence for and against ivermectin, fluvoxamine, hydroxychloroquine, and even over the counter remedies such as Pepcid. My job is to show you how your health decisions are being distorted.
The process that discovers new and better alternatives is fueled by competition in the market. Economists Israel Kirzner and Friedrich Hayek both emphasized that the market process is a discovery procedure.
In his essay, “The Perils of Regulation: A Market Process Approach” contained in his book Discovery and the Capitalist Process, Kirzner systematically reveals the distortions to the discovery process when government regulation is introduced.
Kirzner explains how competition is necessary to discover unexploited opportunities to improve our welfare. “Competition,” he writes, “places pressure on market participants to discover where and how better opportunities as yet unnoticed might be offered to the market.”
In “Competition as a Discovery Procedure,” Hayek explains that competition is a “procedure for discovering facts which, if the procedure did not exist, would remain unknown or at least would not be used.” Governments dislike competition since its “outcomes are unpredictable and on the whole different from those that anyone would have been able to consciously strive for.”
In short, the market process reveals more than what is known by us or any group of us. As Drs. Martin Kulldorff and Jayanta Bhattacharya, two of the co-authors of the Great Barrington Declaration recently wrote, “Unfortunately, sitting atop the world’s largest stash of infectious disease research money, with an annual NIAID [National Institute of Allergy and Infectious Diseases] budget of over $6 billion, Dr. Fauci was able to command the nation’s pandemic strategy with little opposition from other infectious disease scientists.” Healthcare innovation under command and control doesn’t work.
If we assume the real knowledge problem away by dictating the end of a discovery process even as the process is underway, the problem will not be solved. It is through competition that we discover the facts we need for real breakthroughs.
The Market Process Reveals What is Needed
It is an error to believe the government backed vaccines over therapeutics because everyone knew vaccines would work better. Voices warned that vaccinating in a pandemic was not wise, since doing so creates variants. British Medical Journal editor Peter Doshi was among those who warned against accepting Pfizer’s claims of efficacy. Alternative views have been ignored, if not silenced.
The market process doesn’t care what “everyone knows.” Everyone at Blockbuster knew Netflix wasn’t a threat to their brick-and-mortar store model, until the market revealed it was. Everyone knew AOL was the future, until the market showed it was a poor imitation of the Internet.
Kirzner explains, “The competitive market process is needed not only to mobilize existing knowledge but also to generate awareness of opportunities whose very existence until now has been known to no one at all.” Throughout this crisis, many have acted as though the science is settled. Kirzner has pointed words for those who claim they know the best way:
The process itself is a continual one of the discovery of opportunities. The discoverer of these opportunities himself, at least, has had no inkling whatever of their very existence. The market, in other words, is not merely a process of search for information of the need for which men had previously been aware; it is a discovery procedure that tends to correct ignorance where the discoverers themselves were totally unaware that they were ignorant.
Let Kirzner’s words sink in. Throughout this crisis, those who have claimed to know what needs to be known have been lionized. Those brave frontline physicians, known and unknown, such as Dr. Pierre Kory, Dr. Paul Marik, and Dr. Peter McCullough, who have embarked on a discovery process to save the lives of their patients, have been vilified. Dr. Byram Bridle, himself a heroic Covid physician describes his brave colleagues this way:
While so many of their colleagues succumbed to public pressures and failed to follow the science, they demonstrated real commitment to the Hippocratic oath. They used their in-depth clinical training to do what they do best in times of medical crises; they assessed the situation, rapidly identified the key mechanisms driving COVID-19, and repurposed readily available safe drugs to effectively treat this novel disease. These past two years have identified who the real medical heroes are.
No wonder this crisis is never-ending. When we believe experts have all the knowledge needed, the resulting human suffering is not the result of Covid but of our ignorance of the market discovery process.
In the following passage, by Kirzner, substitute “Covid experts” for “social engineers.” “A realization that the market yields knowledge—the sort of knowledge that people do not at present even know they need—should engender among would-be social engineers who seek to replace or to modify the results of the free market a very definite sense of humility.”
Can the Market Process Fail?
You might say the pandemic is a dire emergency and left to its own, the market discovery process would have failed. Kirzner cautions us to check our assumptions. Without engaging in the market process we do not know what knowledge is undiscovered or lost. Kirzner explains,
To announce that one can improve on the performance of the market, one must also claim to know in advance what the market will reveal. This knowledge is clearly impossible in all circumstances. Indeed, where the market process has been thwarted, in general it will not be possible to point with certainty to what might have been discovered that has now been lost.
You might recognize that solutions emerging from the discovery process can be incomplete, leave gaps, and fall short in any number of ways. Kirzner explains that the market discovery process will reveal and address these problems. He explains, “Genuine inefficiencies can be relied upon in the future to generate market processes for their own correction.”
If inefficiencies exist due to a crisis, such as a pandemic, then as Kirzner writes the “market has not yet discovered all that it will surely soon tend to discover.”
We need to ask this question: Are better results likely under the direction of Dr. Fauci or the market discovery process?
If you think the best experts get on top of agencies such as the CDC and FDA, question your assumption. The lionized who are setting policy are often invincibly ignorant. Kirzner cautions,
Nothing ensures that government officials who might perceive market conditions more accurately than others will tend systematically to replace less competent regulators… No systematic process seems at work through which regulators may come to discover what they have not known, especially since they have not known that they enjoy less than complete awareness of a particular situation.
Kirzner writes, “The most serious effect of government regulation on the market discovery process might well be the likelihood that regulation, in a variety of ways, may discourage, hamper, and even completely stifle the discovery process of the unregulated market.”
Out of the Unknown
Centrally planning for health means selecting the lowest common denominator plans that appeal to the masses. Officials largely ignored the relationship between obesity and Covid. Under our current sick care system, where personal responsibility is eschewed in favor of one-size-fits-all solutions, many cannot be induced to take responsibility to eat well and exercise. Yet, government can induce the masses to take a shot.
Some people may have more faith in Dr. Fauci than the market process, but their mistrust is based on an ignorance of economics. To remain ignorant of economics is to destroy the health and well-being of millions. Kirzner writes, “Deliberate intervention by the state not only might serve as an imperfect substitute for the spontaneous market process of discovery; but also might impede desirable processes of discovery the need for which has not been perceived by the government.”
In its desire to promote vaccines, the government has denied there are effective therapeutics for Covid. Indeed, the issuance of Emergency Use Authorization for the vaccines depended legally on there being no approved treatments. Ignorance, corruption, and arrogance cost lives. Ivermectin, hydroxychloroquine, fluvoxamine and other yet unknown therapeutics have been stymied by regulators, hospitals, and censors.
Instead of therapeutics, resources are diverted to endless vaccines. There are reasons a successful Coronavirus vaccine has never been discovered. Kirzner writes, “Nothing within the regulatory process seems able to simulate even remotely well the discovery process that is so integral to the unregulated market.”
And let’s not forget Kirzner’s warning: “The one kind of new ‘profit’ opportunity created by regulation that is now well anticipated, though hardly desired of course, involves bribery and corruption of the regulators.”
Dr. Fauci, Dr. Birx, President Trump, President Biden, and all those who followed their dictates believe the limited minds of anointed experts are superior to a market process of discovery. Their hubris and arrogance are being substituted for an impersonal market discovery process that would produce magnificence.
Think of the difference between a state-run food store in the former Soviet Union and a modern supermarket in America. Boris Yeltsin, in 1989, had his first encounter with an American supermarket. While amazed at the cornucopia of food he saw, he was despondent over the needless impoverishment of Soviet citizens. We would weep over needless suffering in our lingering battle with Covid if we could see what Covid treatments would have already been uncovered in an undistorted discovery process.
Like former communists, those who believe they are masters of the universe will reject the idea that out of the unknown can come richer, more nuanced solutions than their minds could ever hold or conceive. The anointed promoted fear in the population because minds clouded with fear comply with their dictates. Dr. Peter McCullough puts it this way: “The public had to be held in fear and pay a heavy price with hospitalizations and deaths to fully accept vaccines that were not fully evaluated or safe, and were promoted coercively with full indemnification to the manufacturers and those administering the injections.”
Fear of the unknown follows from ignorance of the market process. Yet, being comfortable in the unknown is exactly what yields new therapeutics. With effective treatments, fear would be diminished, and vaccines would be judiciously deployed to those who demand them. Blocking discovery, via crony liability shields, costs lives.
