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All of us have heard stories of partition, families torn apart, loved ones killed, women
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raped, lives destroyed, trains arriving in stations filled with dead bodies, victims
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of slaughter not just of humans, but humanity.
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I've heard these stories all my life, but they seem distant and far away, as if they
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were from an old novel, or even when they were real, as if they were from a black and
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white picture book and not really real.
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We all know that in our lives we will face personal grief.
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People we love will die, and then we will die.
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But we have always assumed, or at least hoped, that as a nation, we would not encounter collective
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This time the details are different.
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We don't yet know how many have died in India because of COVID-19, and how many will die.
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What we do know is that the suffering this time is far more widespread than at any other
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It has touched every corner of this country I love.
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Every morning these days, I spend half an hour after I wake up just writing condolence
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I am so sorry for your loss, take care, get better soon.
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In places like Delhi, every single friend I have is affected.
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And I believe it is worse in our heartlands, where the hospitals cannot run out of oxygen
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because there are no hospitals, where people get ill, and then they die, and there is no
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cause of death noted down, no accounting to be made.
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A few days ago my father also died.
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The municipality didn't allow us near his body, understandably so, or inside the crematorium.
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We watched from a distance until one man came and pointed to the smoke coming from a distant
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That was the last I saw of my father.
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I remember looking at the apartment complex a hundred meters away and wondered what it
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would be like to live in an apartment facing that tower.
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All day you could look outside the window and see lives go up in smoke.
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Well, we are all living in that apartment.
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And whether you look outside or you look within, this is what you will see.
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Lives gone up in smoke in this great country of ours in this 21st century.
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Welcome to the Scene and the Unseen, our weekly podcast on economics, politics and behavioral
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Please welcome your host, Amit Verma.
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Welcome to the Scene and the Unseen.
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My guest today is a brilliant economist, Ajay Shah, and we discuss the economics and politics
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Both of us believe that our government made a tragic error in not getting vaccines out
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there on a war footing.
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It spent too much time.
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It was hobbled by the ideologies of central planning and Atma Nirbhartha, and it still
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hasn't learned all the lessons it should have.
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Ajay helps me get to the heart of the matter, and I understand this subject much better
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after this conversation.
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How could we have vaccinated more people?
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Who should have made these vaccines?
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How should they have been distributed?
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How should we have arrived at a price?
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We discuss all this in today's episode, though we spend the first half of it talking about
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Our healthcare system has been broken for decades.
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It was always going to collapse in the face of a challenge like COVID-19.
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That is why some of us were so terrified in March last year.
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We worried about the sort of scenes that we are seeing today in Delhi and elsewhere.
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We were lucky in April 2020 for a number of reasons to escape that fate.
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But we should have used that time to prepare.
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Well, let's look ahead.
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Healthcare is perhaps the hardest problem to solve in India, so there are no easy answers.
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But we do need to try and understand the nature of this problem.
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In his usual lucid style, Ajay gave me many insights in this conversation.
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But before we get to that, let's take a quick commercial break.
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Long before I was a podcaster, I was a writer.
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In fact, chances are that many of you first heard of me because of my blog India Uncut,
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which was active between 2003 and 2009 and became somewhat popular at the time.
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I loved the freedom the form gave me.
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And I feel I was shaped by it in many ways.
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I exercised my writing muscle every day and was forced to think about many different things
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because I wrote about many different things.
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Well, that phase in my life ended for various reasons.
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And now it is time to revive it.
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Only now I'm doing it through a newsletter.
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I have started the India Uncut newsletter at indiancut.substack.com, where I will write
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regularly about whatever catches my fancy.
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I'll write about some of the themes I cover in this podcast and about much else.
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So please do head on over to indiancut.substack.com and subscribe.
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Once you sign up, each new installment that I write will land up in your email inbox.
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You don't need to go anywhere.
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So subscribe now for free.
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The India Uncut newsletter at indiancut.substack.com.
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Ajay, welcome to The Scene in the Unseen.
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Thank you for having me here.
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You know, the last time we spoke was in Feb.
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In fact, while setting the session up, I realized that we recorded on 4th Feb where we spoke
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about the farm bills, which, by the way, is one of my top 10 downloaded episodes already.
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I think it's moved up to number eight as of now, a combination both of the urgency of
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the subject and I would say the lucidity of your explanations.
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But interestingly, in that episode for the first half, we kind of actually spoke about
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your new interest in public health and health care and so on, especially in a COVID context.
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And sadly, the time has kind of come to go a little deeper into that because of everything
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But before we do that, tell me a little bit about the recent weeks for you.
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What's it been like in general?
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Mercifully, I've been well.
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My people have been well.
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But for the rest, like everybody else, this is just a nightmare.
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We keep hearing of friends and friends of friends.
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Person X reaches out to person Y, help find me oxygen, help find me an ICU bed.
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It is a relentless assault on the soul.
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You just get exhausted.
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You just keep wondering and praying.
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Is there something we could do different?
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Yeah, I mean, there's a new term for this now called doom scrolling, where you just
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kind of go on Twitter and you're doom scrolling.
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You're just, it's horrendous.
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I've never seen anything like this.
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And I think, you know, the collective trauma that we are going through is, you know, in
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one sense, even greater than partition because it's spread out everywhere throughout the
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Like, I'm sure every home in this country knows someone who has suffered or died and
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I mean, when I talk to my friends in Delhi, like everybody has, you know, is going through
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I have experienced a very peculiar conflict in my head, and I'm sure you will understand
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And let me just say it.
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So I'm reminded of the British side in World War Two, where the binding constraint was
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You could do everything else.
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You can build planes in a hurry.
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You can do all kinds of things in a hurry, but you can't create a good pilot in a hurry.
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So that's my intuition about thinking about the healthcare system.
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You have a certain amount of doctors.
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You have a certain amount of nurses.
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They're working flat out 18 hours a day, and in the short run, their supply elasticity
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There is nothing you can do to augment the skilled staff inside the healthcare facilities.
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You can do a little bit more quickly in terms of putting up some ICU beds and some little
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But fundamentally, in the short term, it is impossible to change the number of healthcare
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In that case, as a society, as a system, it's curtains.
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There is 100 beds of capacity, and if there are 200 people who require that capacity,
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then there's just the horrendous choice of triaging and choosing which 100 are going
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And each of us would love to have our friends and family access those beds.
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But in system thinking, that's no answer, because any one person that gets in is coming
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at the expense of somebody else, and how do you make those moral choices?
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Similarly, as an economist, it has always been apparent to me that if you put more money
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into the problem right now, all that happens is that the demand curve intersects with the
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rigid supply curve at a higher price.
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All you do with a little more money buying healthcare services at a time like this is
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You don't change the brute reality, which is that there are 200 people demanding a capacity
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of 100, and in the short term, that capacity cannot be changed.
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I mean, one, of course, when you speak of the moral choices we have to make, some of
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these choices come down totally to privilege and power.
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For example, there was this heartbreaking video of this person who had got an oxygen
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cylinder for his father or uncle or whatever who obviously needed it badly and was going
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to die, and the cops came and they confiscated it from him because they wanted to take it
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for a VIP, which just kind of tells you the colonial mindset of the state.
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And one of the really heartening things about the last couple of weeks also has another
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And that's the scene and the unseen, which is, you know, on the one hand, it's heartening
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that everyone who's reached out on Twitter has just got so much help from people like
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just now before, you know, this recording began and this is like 2 p.m. on April 29th.
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And just before this recording began, I saw this tweet from my good friend, Joy Bhattacharya,
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who said that he knows of at least 12 people who have been helped by reaching out on Twitter,
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But the unseen side of that is that there are 12 other people who didn't get that help
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because everything is limited, there is an opportunity cost even for that.
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And sure, you know, we kind of have the privilege, even anyone who can use Twitter and reach
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out like that and get amplified also has a certain amount of privilege.
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And I'm happy for everyone who's, you know, managed to get help and all of that in these
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But the brute reality is that if there are 200 beds and 500 people who need them, 300
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I mean, it's a pretty horrible situation.
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And last year in March, I remember, you know, I recorded an episode on COVID, the first
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of my many episodes on COVID in general.
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And my guest in that one was Shruti Rajgopalan.
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And before we recorded that episode, you know, as far back as March last year, she was telling
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me about what could happen to the health care system in India and from her experiences of
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her friends in Italy where she had lived and all, Bergamo and so on.
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And I thought, OK, great, we got lucky, you know, whether it was lockdown or a combination
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of other factors that people have speculated on.
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And it's happened a year later.
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And you kind of realize.
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So I think we always knew that the Indian health care system doesn't work so well.
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And the capacity in the health care system is minuscule.
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So you know, in my mind's eye, this was always on my mind.
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I remember back in February and March 2020, I was writing the first paper on this subject
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that I happened to work on.
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I've written many, many things on the subject, but my first writing was in February and March.
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I was writing a paper on the subject and my co-author and I were kind of playing this
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And it was just chilling because you do the arithmetic, you know, you just multiply through
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by some plausible hospitalization rates, by some plausible fatality rates multiplied by
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the Indian age structure of the population.
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And what you get is quite a disaster.
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One of the things that this pandemic has sort of done for us, and I've written a column
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on this last year as well, is that it's laid bare a greater ongoing disaster, which is
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our dysfunctional flailing state, right?
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And one subset of that, and not even a subset of that, there's a small overlap, but another
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thing that is laid bare is obviously what a bad state our health care is in.
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Now you pointed out about how our health care workers are limited.
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There are only so many doctors and there are only so many nurses.
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And what they are doing is just incredibly heroic.
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Most of them going well beyond the call of duty and the kind of risks they take and the
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kind of service they're putting in, but they're limited.
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Give me a sense now that if you look at it outside the context of the pandemic, you know,
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how can we quantify the shortcomings in our health care system, especially in something
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Like are there figures that, you know, in a developed country, there would be so many
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doctors plus a thousand people in the population, so many nurses or whatever.
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Are there quantifiable ways to think about how in terms of health care we are so far
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Here I'm afraid I'm going to go all economist on you.
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So this is about money, this is about affluence, it's about how much you're willing to spend.
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So it turns on the ratio between the income of a doctor and the income of the general
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So if you live in a country where your income is good vis-a-vis a doctor's income, then
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you're going to fare relatively well because using your income, you're going to be able
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to buy many man hours of a doctor's time and vice versa.
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So now the large mass of the Indian population has an income where frankly meaningful levels
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of training in the doctor are unaffordable.
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So I classify that as a poverty problem.
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I classify that as an underdevelopment problem, that it is just baked in.
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It is inevitable that when we're a poor country and because building a doctor is like building
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an RAF pilot is something that takes thousands of hours of training.
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It's a considerable investment and it's not possible to make a particularly cheap doctor.
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We need to improve processes and bring down the cost of health care.
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We need more telemedicine, we need more AI-based diagnosis systems backed by just a nurse.
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They are all great directions to go in.
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But the brute fact is that there is a poverty problem.
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So I think the metrics that you refer to are a bit dangerous because we slip into a first
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world way of thinking and that's not a fair comparison against where we are in India today.
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So in India today, we should be asking the question that at Indian levels of income,
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what can you do different?
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And in my opinion, we need to do a revolution in AI plus nurse rather than a doctor because
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for the foreseeable future, there is not going to be a doctor.
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We need to do much more with telemedicine.
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And again, the telemedicine can be some hybrid of a doctor or an AI at the other end.
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It doesn't even have to be a human being all the time.
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And then we turn to health care system design.
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And this turns on problems like what's the nature of the market failure in health care?
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And the market failure of health care is basically a crisis of asymmetric information.
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When you are faced with a hospital and the hospital says that your mother needs a ventilator
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and if you don't sign on this piece of paper right now, she's going to die.
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What are you going to do?
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So there is extreme miss-selling by private health care providers.
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And the question is, how do we reorganize health care so as to address that market failure
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and produce better behavior out of private providers?
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And then somewhere in this, the least important element of the Indian health care system is
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there is one large PSU who's called the government.
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So the government is not thinking health policy.
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The government is thinking I'm one big PSU.
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So there is many, many government hospitals, there are many, many government departments
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And they seem to concentrate on being a PSU.
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So think of an old department of telecom, which was thinking that they are in the telephony
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That's the Indian health establishment.
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And this is part of the story about why we do so badly on health policy.
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Because the DNA of the Indian health policy community is to look at the world from the
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worldview of a health care PSU.
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And they are not used to worrying about their own operational capabilities and efficiency.
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And they're used to just always asking for more money.
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So their answer is always more money.
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If you speak to any conventional health expert in India, the story is give me more money.
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And that's not a very useful way to approach it.
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Because neither does the health care PSU work too well, nor does the private sector health
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So we are caught between two bad things that are happening in the country.
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And that's the essence of what is wrong with Indian health care today.
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The puzzle, the thinking challenge, the research challenge is how to understand this landscape,
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how to create the data sets that will support the research on this landscape, and how to
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find our way out of this problem.
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And I don't pretend to have the answers.
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But I am at this level of knowledge that I am able to succinctly pose the questions.
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Because I was going to take a couple of strands and ask you for potential answers for that.
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And I'm going to try and do that anyway.
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And one of those strands is that just as Indians understand that there is no rule of law effectively
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in this country, for most people, unless you're incredibly privileged.
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People have Jogadu ways of getting by, their social trust, and all of those things come
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But actually, there isn't really a functional health care system in the sense that most
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individuals in this country are one medical emergency away from just going broke.
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That's just a fact of the matter.
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I've written about so many other problems India has faced, but this is one field where
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I haven't quite gotten and handled on the structural problems.
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For example, we can look at something like education and say that, OK, here's a structural
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The incentives for the state are bad in terms of provision, and it should just allow far
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more private provision and just let society solve its own problems while simultaneously
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trying to beef up state capacity and do what it's doing.
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Similarly, we've discussed the problems of agriculture in our last episode, and I've
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gone deeper into it in previous episodes before that.
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But what is the problem with health care?
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Because in the eyes of the common man, you're just in denial that you're ever going to fall
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Just as we have an illusion of immortality, which keeps us away from thinking about the
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fact that we have a limited time span, although sadly in the last few days, I think many more
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people have had occasion to ponder on that.
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But just as we have that illusion of immortality and we live as we're going to live forever,
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we also have this illusion of good health, and we are in denial of the fact that someday
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we will require medical help.
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And the impression most people will have of, say, private medical health in India is that
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it's almost like a scam, almost like a racket.
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I think Pranadas Gupta wrote a book about this a few years ago about the situation in
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Delhi, that you go to any of these big hospitals and they'll give you hazard tests which you
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don't require, and they'll completely fleece you, and their incentives are tailored towards
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Doctors' incentives are tailored towards prescribing more and more tests, so the hospital
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makes money, and blah, blah, blah, and everything seems kind of broken.
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And of course, public health care in India is the worst, so the answer isn't even that.
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So structurally, what are the problems that they are?
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And given the poverty, are they solvable, or do we need to solve for poverty first?
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So again, I will go all economist on you that whatever X rupees are being spent, the puzzle
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is on how to get the most bang for the buck.
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So I just treat the poverty problem as given.
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One day we're going to get rich, and that'll get better.
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So it is incredibly important to push for broad GDP growth is the greatest weapon to
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solve all these problems.
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But right now, let's stick to an allocative problem.
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I was sitting with my dear friends, Jeff Hammer and Lance Pritchett.
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At the time, my mind used to be filled with macroeconomics and finance, and we were doing
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a furious conversation around some of those things, and at some point, both of them stopped
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and said, you know, Ajay, you're a very smart guy.
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You think you're thinking a lot about macroeconomics and finance, but you know what?
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When you grow up, you're going to have to do health.
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And they said, everything that you're doing is trivial.
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And the really hard problem is health, that actually fixing monetary policy, doing an
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inflation targeting system with the Monetary Policy Committee and narrow down the function
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of the central bank, it's kind of obvious, and it's really not hard.
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There is just some pesky political problems you have to solve, but it's not really hard.
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Similarly, you want to do international trade, frankly, you know, at the end of the tunnel,
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there's basically only one thing to do, which is remove all trade barriers, okay?
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You can do it in an obfuscated way, you can do it in a complicated way, but there's really
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nothing hard there, and so on, whereas the truly difficult thing is health, why?
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In my opinion, the pieces of it are as follows.
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The first is that there is such a profound amount of asymmetric information.
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You and I really don't know what the doctor does.
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You and I really don't know the marginal contribution of a doctor to kind of make an education analogy.
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In education, we like to think that we'll pay for test results, but there is the ever
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present problem that some part of the test results are baked in because of the child
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at home and family, and some of the test results are the contribution of the teacher.
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So for example, a school running in a slum will always generate low test scores, and
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if we think we're going to pay something proportional to the test scores, then we're doing something
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So it's very hard to disentangle the contribution of the healthcare.
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You and I as individual customers are not very wise in how we think of our healthcare
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Too many of us go to quacks, we endlessly submit to all kinds of nonsense where there
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is some alternative therapy or the other, and we tend to take it more seriously than
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we should, or we tend to care about a bedside manner.
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We tend to think that a doctor who speaks nicely to me is a nice doctor.
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We tend to think that a doctor who speaks in English knows more than a doctor who does
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not speak in English, and so on.
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There is a hundred cognitive biases that are in play, and we are all very smug, and we
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have persuaded ourselves that we understand this stuff, whereas actually we don't, and
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that creates all the wrong incentives.
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So hospitals have incentives to look like five-star hotels, but that's not essential
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to the business of being a hospital.
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To be a good hospital, you need to be clean, but you don't need to be like a five-star
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Whereas the modern Indian healthcare industry is really building some expensive infrastructure
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and loaning it out, renting it out to one doctor or one specialist after another, and
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customers are just going by the glitz and the brand name and the marble foyer rather
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than the substantive content of the knowledge and the value add of the healthcare.
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There are important regional differences in some of these problems.
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So some of my friends have invested in many healthcare companies.
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They have purchased and successfully built and exited many healthcare companies, and
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I remember one of the partners said to me that he has never felt comfortable about buying
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a healthcare establishment in North India because he felt there is a pervasive ethical
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collapse in North India of the kind that you don't see in the other parts of the country.
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So in the West and the South, there is still a little more of the ideal of a doctor as
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a service provider, of a doctor as a good person that is going to take care of you.
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Whereas in North India, there seems to be a bigger collapse into just craven commercial
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considerations where a doctor misprescribes drugs and tests and gets a kickback.
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Amusingly enough, I want to say that in the field of finance, we've gone after kickbacks.
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We do more with mutual funds and insurance companies in blocking the kickbacks from a
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manufacturer to the sales agent, whereas in the field of medicine, we do nothing.
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We do absolutely nothing today in blocking these kickbacks, and I consider these kickbacks
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highly unethical, but they are the norm and not the exception.
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Another anecdote, one of my colleagues in Delhi was experiencing a certain class of
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concerns and she spoke with a person in Bombay on this question who was a doctor, and the
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feedback I got was that she should buy a ticket and come to Bombay and do this entire thing
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They don't do it in Delhi because the health care establishment in Delhi is so bad, it's
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Do your work in Bombay.
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There's more decency, there's more ethics, there's more fair play in Bombay.
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Last anecdote, if I had a horrendous life-threatening situation, what would I like to do?
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I'd like to buy a ticket and go to Christian Medical College, Vellore.
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This is an old-fashioned place where doctors are paid a fixed salary and there are no kickbacks.
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In my opinion, it's the best health care in India.
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The profound asymmetry between the health care provider and the customer really poses
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a difficult challenge for market-based thinking, and we in India are in some peculiar place
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where there are some noble establishments like Christian Medical College, Vellore.
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There are some parts of the country and there are some organizations who care more about
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the well-being of patients and seem to do a better job, and then there is most of India
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which is in a wasteland of kickbacks and all the wrong incentives for doctors.
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Somewhere in this, we have to bring in the distinction between the medicalization of
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health care and the problem of wellness.
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If you pause to think about it, I think we spoke about it last time in the farm bills
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thing, prevention is a thousand times better than cure, and you just come back at this
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over and over and over.
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All of us should be prioritizing wellness a thousand times more than we do with the
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In wellness, I would always go beyond the physical body to the mind for two reasons.
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First is that because a healthy mind fosters a healthy body, and the second is because
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the purpose of living is to have some peace of mind and happiness, which is a mental state,
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it's not a physical state.
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Really, the whole point of us being alive and seeking utility and maximizing utils is
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It's about having peace of mind, being comfortable with what you are doing, finding meaning and
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purpose in your life rather than being on a treadmill.
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These problems are intricately connected to the state of health of the person that a lot
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of the hard-driving people who are extremely ambitious are actually very messed up both
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in terms of the state of mind and in the state of body.
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These are difficult, difficult problems, and the present Indian health care establishment
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has no interest at all in you as a human being.
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They don't want to talk about your state of stress and your unhealthy lifestyle, and what
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you really need a lot of the time is a good talking to by a wise person saying, dude,
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you need to fix your life.
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Instead, the health care provider is saying, yeah, come here, I'll put you under the knife
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and I'll fix you up, and sure enough, two years from now, you're going to be messed
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This is a profoundly different perspective that I think we need to bring to bear on our
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lives as individuals, but putting our heads into it as thinkers and economists and thinking
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about the state and society, it is very difficult to create the correct incentives for a health
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care system that would even pause to think about these things, because for the health
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care provider, it's literally how many rupees can I make per minute?
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Becoming avuncular and having a good conversation with you is not that person's incentive.
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Yeah, and it strikes me that there's an intersection of different domains here, which are kind
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Obviously, one of those domains is this mental wellness stuff and all of that, and a doctor
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who's there to treat the body who's been trained in, say, cardiology or vascular disease or
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whatever might well say that, look, I've been trained in this and this is what I will do,
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the treatment in and the wellness is for other folks and I kind of get that.
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The other two sort of different domains and you'd elaborated on this last time and I intend
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to ask you about after this question is, of course, the two separate domains of public
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health and health care where public health really falls into prevention and should be
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the responsibility of the state and health care is much more of a kind of private thing.
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But my specific question about the private situation remains in the sense that, you know,
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everybody wants to make money.
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Everybody is greedy, not just the doctors.
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You are greedy in different ways and everybody's not necessarily greedy for money.
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You want to make money.
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You make money by making someone else's life better off.
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It's a positive sum game.
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The incentives are good here.
#
Of course, the incentives are kind of the problem because the asymmetric information
#
is getting in the way because patients don't know what's good for them.
#
They have no option but to listen to what the doctor prescribes and the doctor will,
#
you know, go down all of these roads where he gets maximum kickback and all that.
#
And they're responding to incentives.
#
I guess there are two key questions.
#
One is what can be done to change the situation of asymmetric information?
#
Like you're saying in other fields, like finance and all things have been done and they're
#
working to whatever extent.
#
And more importantly, how do you change the incentives like in any other domain that I
#
think about the way to change the incentives is that you let competition thrive and competition
#
is the best regulation.
#
And you know, the incentives kind of fall into place.
#
And by letting competition thrive, I mean, I don't just mean markets.
#
People often mix it up in India where we don't have free markets and anything at all.
#
There is more and more cronyism where the whole idea is that big corporates want to
#
But ideally, if you want to get the incentives right, you want to keep cronyism at bay.
#
You want to keep state power at bay.
#
You want the rule of law to be maintained, but you want competition.
#
But in healthcare, the answer doesn't seem so simple.
#
Like you said, for people who think about the world through this prism of voluntary
#
action, positive sum games, competition, right incentives, all of that, somewhere it doesn't
#
That's what I'm trying to put my finger on.
#
So if I ask you to get specific, you know, what would that be?
#
The first piece would be that we are at the infancy in terms of studying and understanding
#
And the first desperate need is more data.
#
So we just don't know enough about this field.
#
So I recall many other fields where I have worked on in previous years.
#
Generally, when the work program began, there was a fair evidentiary base.
#
So there is a burning crisis in this field, which is the lack of data.
#
So we need to go into the reality of India, where there is 60, 70, 80% private healthcare
#
and the remainder is public healthcare, and we need to do measurement, measurement, measurement,
#
make data sets and release them.
#
And maybe for 10, 20 years, that's all that we are able to do.
#
And out of that will come better knowledge.
#
This is my first sense of what is it that should practically be done.
#
The first thing that needs to be done is we need to build data sets about what's actually
#
happening on the ground in the field of health.
#
My second thought is that what we need is sophisticated buyers who will exert countervailing
#
So you and me as customers, it doesn't work too well.
#
I would readily have gone down the path of thinking, is there a role for the state?
#
And could we build some regulatory capacity?
#
Could you build some product liability, some tort law?
#
And you should do a little bit of it, because there is a role for some amount of liability
#
For example, just shutting down the kickbacks is going to need force of law.
#
So there is a need for tort law and some amount of regulation.
#
I say this softly because at present the project of the Indian Regulatory State, the Indian
#
Administrative State is really not working.
#
So we need to get to it at some point, but I'm not optimistic that that time is now because
#
right now that project is in a bit of shambles.
#
It's really working very poorly all across the landscape.
#
We're not succeeding on the business of law, courts, judiciary, enforcement, regulators,
#
and regulation, regulators that cause private people.
#
I used to be more optimistic about that agenda a while ago.
#
Today I think we've run aground and we need to really pick ourselves up and make some
#
And at a future date, it could have a significant role in the field of health as well.
#
And that's what brings me to sophisticated buyers.
#
It seems to me that the most useful thing to do today is to build a cadre of sophisticated
#
buyers and it can work in two ways.
#
Basically think of a health insurance company that says to you that you give me X rupees
#
a month and I'm responsible for all your health care.
#
And imagine we do enough work around that sentence so that they don't actually shortchange
#
you because all too often in India, the health insurance company is just rejecting your claims
#
and is saying, sorry, I'm not going to pay.
#
Assume for a moment that we found our way through that.
#
And then that health insurance company is able to be a tough, sophisticated buyer that
#
can have negotiating power against health care organizations and can generate better
#
outcomes for the customer, can fight for the customer, can act for the customer.
#
Otherwise, right now you and I are just in a very bad bargaining position when we step
#
And the more urgent and the more hard trending the situation, the greater is the extent to
#
which we are likely to just go along and say yes to something that an employee of the hospital
#
says and that's unfortunately not a very good thing.
#
I mentioned a health maintenance organization and HMO, which in the limit is a consortium
#
of health care organizations and insurance where it all comes together that you sign
#
on for a comprehensive agreement and they take care of you for life.
#
They have well-designed, specified clinical protocols through which they will deliver
#
And we need to worry about consumer protection because they also have an incentive to underspend
#
But it seems to me that that's a good direction worth going in.
#
And in India, the cutting edge of this is insurance.
#
But then you get into my old beat, which is insurance companies and insurance regulation.
#
And I have a fairly gloomy feeling about the state of capability either in IRDA or in the
#
So none of these pathways are readily open in India right now.
#
They are all difficult long journeys.
#
That doesn't mean you should not do them.
#
So if you tell me that a tree is going to take 20 years to fruition, I'll say let's
#
run out and plant it right now.
#
So it seems to me that work on data, work on insurance companies, work on insurance
#
regulation, these are the highest priorities in thinking about health care in India today.
#
So a couple of questions that arise from this.
#
One is you spoke about the need for data, about we need to gather data better, we need
#
more specific data sets, and so on and so forth.
#
And I just recorded an episode yesterday which will actually go out after yours because vaccination
#
is a more urgent subject.
#
But I chatted with Gautam Menon, incredibly insightful episode.
#
And if I remember correctly, I hope I'm not getting the source wrong.
#
One of the things he spoke about in the episode was the data that we have in terms of cause
#
About 80% of India won't give the deaths aren't recorded with the cause and blah, blah, blah.
#
And the percentage where you actually know the cause of death that has happened is just
#
something ludicrously low and therefore is not useful in any way.
#
And especially in the context of COVID, what we are seeing around us where, sorry.
#
Causes of death is an exotic frontier in India today.
#
Counting the dead is the immediate battle.
#
You go to New York City, you get a website where every day the number of dead are reported.
#
That data is exotic in India today.
#
You just don't have the number of deaths in India.
#
So the municipalities know what's happening in the crematoriums, but they don't release.
#
So basic health data infrastructure in India is lacking.
#
And we are seeing that around us in these COVID times where not only don't we have accurate
#
data about what's going on now, but it is likely that part of the reason for this present
#
crisis was that we didn't get accurate data during the first wave as it were.
#
And because we didn't understand the extent of the spread of the pandemic and the damage
#
it caused, we didn't prepare as much as we should have.
#
We weren't as alarmed as we should have been, we got complacent.
#
But my specific question to you is this, that what kind of data sets are we talking about
#
specifically and what is the concrete difference that they make?
#
You know that if you get X data, we'll be able to do Y thing or understand this aspect
#
of the system better and make it better and pieces fall into place.
#
Give me a sense of that with specifics if it's possible.
#
What works is to just think blow by blow about the activities in a system of interest and
#
then just think of putting numbers to the whole thing.
#
That's how we think of data sets.
#
Are people getting sick?
#
Are people feeling well?
#
Are people feeling healthy?
#
Is the first basic question.
#
So you will get evidence about the extent to which people say, I'm not feeling good
#
And you will start looking at this on a map, you'll get a heat map of where people are
#
unwell in India, is it younger people, is it older people and so on.
#
Right there you will see some public health stories where arsenic in the water makes you
#
more unhealthy and it suggests public health interventions.
#
Then a person is feeling bad to the point where they seek health care.
#
So I'd like to know, do different people have different psychological and affluence trigger
#
points for seeking health care?
#
Very important to know that what's the point at which you decide that I'm going to go
#
What's the fever at which you think it's okay to go to work?
#
What's the fever at which you think it's not okay to go to work?
#
And then you decide that, okay, this is really no good.
#
I've been down for three whole days.
#
Now I need to go find health care.
#
Then do you choose to go to a private facility?
#
Do you choose to go to a public facility?
#
Then think of fine grained data where you have the GPS codes of the household and the
#
GPS codes of the provider and what determines provider choice.
#
Then you need to start creating data sets that understand there are different categories
#
There are complete quacks.
#
You call it whatever you call it, Ayurvedic or homeopathic or uncertified or whatever.
#
There's all kinds of quacks in the landscape.
#
Do you go to quacks or do you go to something that claims some semblance of a medical education?
#
And then of course there are medical colleges in India that do next to nothing in terms
#
So what's the human capital of the provider and what shapes the choice of the individual?
#
How does an individual choose?
#
So is it that if there are two children in the house, there's a boy and there's a girl
#
and the household has different trigger points for the boy to get health care and the boy
#
gets sent to some serious MBBS doctor and the girl gets taken to a quack.
#
So what happens in the behavior and the decision making of the household?
#
Then what was the behavior and the decision making of the providers that Jeff Hammer has
#
once said to me that in his research on India and medical care, here is his description
#
of what actually happens in the model conversation between a healthcare professional and a patient.
#
The patient goes and sits in a chair.
#
The healthcare professional utters two words, which in Hindi are kya hai.
#
Which is what do you have?
#
And the person says something about what symptoms that person is suffering.
#
The doctor scribbles a prescription, hands over the prescription.
#
That's all that happens by way of conversation and asks for some money.
#
This is all healthcare interaction.
#
So can we study these healthcare interactions?
#
Do certain kind of symptoms generate a different investigative tree on the part of the provider?
#
Do certain kind of patients go down a different investigative tree?
#
If I speak in English with the doctor, does the doctor treat me differently from if I
#
So these are all the interesting questions to pursue that Jeff has always said to me
#
that there are many doctors in India who know a lot and they exercise their discretion and
#
choose when to put their knowledge into play.
#
So it's not like the doctor is going to put full effort on every single patient.
#
The doctor has a notion that there is a patient where I'm just going to spend two minutes
#
and get 200 rupees and not really going to try, whereas for certain patients, I'm going
#
And then finally you get to the holy grail, which is that to what extent did the visit
#
to a healthcare professional make a marginal difference to making the person better off?
#
And that can be viewed in many different ways.
#
As all of us know, in a large fraction of problems, if you're just going to sit home
#
and do absolutely nothing, odds are you're going to get better.
#
And under many, many circumstances, the human just gets better.
#
So you need to think about treatment and control where case one, the person does absolutely
#
Case two, the person goes to a healthcare provider.
#
Did you get better or did you get misprescribed some bad things and did it actually do damage
#
And then finally you go closer to the wellness question that to what extent do episodes of
#
healthcare create conditions for going towards higher wellness versus to what extent do
#
interactions with the healthcare business generate a mere medicalization?
#
So you just go back over and over and keep going through one bout of medicalization after
#
So this is a sort of flow perspective of thinking from the viewpoint of one household.
#
Think of all the things that they do and imagine in some dream world where we measure, measure,
#
measure, measure, and we think about how different kinds of healthcare establishments, different
#
kinds of tariff structures, presence of an insurance company as a counterweight in negotiating
#
Does it change the behavior of the hospital and so on?
#
So these are all the research questions that can flow from this kind of detailed comprehensive
#
And I guess if this data is all publicly available, then what also happens is that entrepreneurs
#
everywhere get a sense of which are the problems that need to be solved.
#
And today we don't even have an adequate idea of that.
#
So we have blunt tools for blunt problems and they might not achieve anything.
#
The other strand I want to take up from what you said before was when you spoke about the
#
If I may just stay on that data subject, there is a lot of well-meaning philanthropy in India
#
where people try to do well.
#
And the answer is that let me go build a free hospital or let me go to underserved places
#
like Bihar and run programs to do nutrition interventions or vaccinations for kids.
#
And I'll try to make kids in Bihar healthier.
#
And in my opinion, while these things mean well, they don't solve the problem.
#
So the system is broken.
#
And the highest bang for the buck is in understanding the system, in building knowledge, and in
#
that long journey of the deeper transformation that is required.
#
So I've seen lots of well-meaning people put resourcing into these things and frankly
#
just generate work on the epiphenomena, which it just feels good.
#
So there is an instinctive and emotional thing that, oh, there's a person who's feeling bad
#
or there are so many million children dying in Uttar Pradesh and I want to make a dent
#
to the number of kids who are dying in Uttar Pradesh.
#
I feel that it would be more effective to be cold and to be intellectual and to build
#
knowledge and to build a research community, because that's where we will get the deeper
#
solutions and we will stop this thing for life.
#
Otherwise, there's a boat that's leaking and you're just bailing and you're bailing.
#
We're just not bailing enough to make a material difference.
#
And year after year, the Indian health system is getting more and more locked into horrible
#
And don't underestimate the political economy problems of the incentives, because the malfunctioning
#
heart surgeons of India have all the politicians of India on their little black books.
#
So they're an extremely effective lobby and when the country changes in ways that question
#
their privileges and income, they're going to lobby to change things in their way.
#
So every year that we go down this route of bad incentives, we actually make things worse.
#
So I feel that we really need to think more effectively.
#
In the world of the well-meaning, generous, philanthropic people who are trying to put
#
resourcing into solving this problem, they need to step away from the instant rush of
#
happiness that comes from feeding one child to the more abstract conception of building
#
knowledge and building a research community and building greater thinking capabilities
#
in this country, because in the end, that's the only way we're ever going to solve things.
#
So let me for a moment leave the previous strand and I'll come back to that strand later
#
before we pursue other strands, but take up this strand.
#
And in this strand, let's move away from the abstract to the concrete.
#
Let's say that a philanthropist comes to you tomorrow, maybe after listening to this episode
#
and says that, oh, I heard you in that episode and I want to give you a hundred million dollars
#
to spend on healthcare, as you will.
#
And I was going to build hospitals in Bihar, but I have realized that that is giving a
#
I want to teach him to fish.
#
I mean, broadly, I just want to make the system work much better.
#
So you, Ajay Shah, take my hundred million dollars and spend it on improving healthcare
#
I don't care if you're playing a long game, have a 20 year span by all means, but use
#
your wisdom and spend it.
#
What are you doing with that hundred million?
#
All the things that I said from the beginning.
#
You said abstract things.
#
Give me a few concrete things.
#
Build data sets, build research, build researchers, build community, build health policy thinking,
#
build health policy debate.
#
One of the tragedies of this country is that we tend to assume that a doctor thinks health
#
This is completely incorrect.
#
A doctor knows how to cut open my chest and perform surgery upon my heart, does not know
#
how to think about incentives, markets and systems.
#
So we need to go down the route of building knowledge, building research, building researchers,
#
and also on some of the science and business models around some of the innovations about
#
telemedicine and AI and basically a nurse assisted system, which would be able to operate
#
in remote places of India because we're not going to have enough doctors for the foreseeable
#
So that would be my thought process on the big problems that require solving.
#
So now to come back to my earlier strand, where we were speaking about how if you have
#
enough data, entrepreneurs kind of know what holes in the market to fill or what problems
#
And you also mentioned the necessity of having sophisticated buyers who understand what they're
#
buying into and some of the asymmetry of information goes.
#
Now, one way of doing this, as you said, is insurance companies, but there the incentives
#
are also going in another direction and I don't know how that works out.
#
And it strikes me that this is also a great market opportunity that entrepreneurs can
#
look at this lack of sophisticated buyers or the lack that every individual would feel
#
of a sophisticated buyer within herself and say that, okay, how do I kind of fill this
#
Do you think there's a gap like that and what role do you think AI can have in filling that
#
Like one of the things that we've seen during COVID, one of the great tragedies, in fact,
#
I mean, it's just so sad when the Twitter timeline is full of calls for Plasma and Remdesivir
#
and we know that Plasma does not work and Remdesivir basically does not work in the
#
context of delaying fatalities or in serious cases at all.
#
It's just a waste of time.
#
And yet, you know, patients will go to doctors and say, oh, what about Plasma?
#
Doctors will, you know, just go by the form and say, okay, fine, you know, to get the
#
patients off their back.
#
I've actually heard of people, relatives of patients contracting COVID because they've
#
been running all around the city trying to get Plasma and Remdesivir and this just seems
#
so completely ridiculous and you can't blame them because in that moment, in that chaos
#
of emotion in the middle of Armageddon, as it were, when you could have an aged parent
#
on oxygen and the doctors telling you get this, get that.
#
In that moment, you can't expect sophistication.
#
Is there a way where outside the current system, there is a disruptive way of coming in and
#
solving for this problem?
#
Maybe in the long run, you know, AI could be a part of the puzzle, but you know, what
#
The bottleneck is scale, okay?
#
So the entire Indian healthcare landscape is broken, particularly in North India, okay?
#
So I want to use a word which will set off alarm bells in the minds of many people, but
#
I want to use the word corruption, okay?
#
So when a doctor distorts her professional judgment in return for some kickbacks, I call
#
The entire business model of individuals and organizations is rooted around these corrupt
#
It's not easy for any one organization to change that.
#
So imagine you and I are going to set up a brand new hospital and we will have a different
#
wage structure for the doctors that we might hire, and we will say to the doctors, no kickbacks,
#
So the quick outcome will be no sensible profit-maximizing doctor will want to join us.
#
How do you overcome that?
#
Christian Medical College Welles has solved that problem because they have created an
#
amazing history, a culture, a tradition, and they've managed to say this to a large number
#
of early-stage doctors in their careers that, look, if you have these kind of values, come
#
And that's how they have overcome the problem.
#
But there is no ready business model through which you can overcome this problem.
#
By the way, we've seen this exact same problem in finance.
#
So in finance, we had that same pervasive problem.
#
Najiket Moore and Bindu Anand and others built a remarkable organization that is called KGFS.
#
Today, KGFS is significantly profitable, and they began going to remote locations where
#
there was not even a bank branch and performing basic financial services for poor people.
#
The trouble is, if you try bringing that model to a city, and in the city, you're competing
#
against hard-driving finance distributors and finance salespeople who are being given
#
kickbacks, how do you compete with that?
#
An organization where employees get salaries and employees don't get kickbacks will not
#
easily be able to compete against the kickback model until a lot goes in in terms of getting
#
the message to households that you really should not be dealing with these toxic characters.
#
So I used to do innumerable talks in finance, and I used to always try to put in a public
#
service announcement that please don't ever buy an insurance product in India because
#
the entire business model of insurance is broken.
#
And it took years and years and years of that, but there have been significant improvements
#
in the business model of insurance companies which were driven by the IRDA, it was driven
#
So if I make that analogy here, then we are up against a long, slow battle that we need
#
to build some amount of medical malpractice law and tort law and consumer protection law
#
and regulation of the behavior of medical persons.
#
And the moment I say all this stuff, I already start getting depressed because it is incredibly
#
difficult to build this kind of state capacity under Indian conditions.
#
And in fact, we have failed in so many other areas that I don't think it's wise to recommend
#
that toolkit for one more new area.
#
It seems to me we should fix it in the other areas.
#
This is broken in all the other areas where it's up and running.
#
So I feel that the cutting edge, what one would say to the philanthropist, the cutting
#
edge of health policy is to make SEBI work better.
#
Because if one day we get to a SEBI that works, we'll be able to take elements of that law
#
and organization design and apply that to health.
#
Yeah, no, that makes sense that given state capacity, we haven't managed to get ABC right.
#
We can hardly speak of XYZ or even Shakespeare's plays.
#
And I'm very mindful of the word state coercion.
#
So much as I like to complain about kickbacks and corruption, the fact is when you bring
#
a coercive creature called the state, that has pretty bad consequences of its own.
#
So we should think 20 times before we bring state violence into the relationship between
#
a doctor and a patient.
#
It has its own bad consequences, it will have its own malfunction.
#
So let's not be starry-eyed about what state intervention would do.
#
So we are caught between these two bad worlds.
#
And our pathway for the coming years is to build knowledge, is to build research, is
#
to build researchers, is to build data sets, is to build a health policy community which
#
is distinct and separate from doctors.
#
So we could really do a four, five, eight, 10-hour episode on talking about health care.
#
But I guess the urgent sort of imperative of the moment is to talk more about the economics
#
and politics of vaccination and what's happening with that in this current moment.
#
But let's take a quick commercial break and then on the other side of the break, we'll
#
Pradeep Mishra and Jaydeep Mehrotra.
#
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#
Welcome back to the Seen and The Unseen.
#
I'm chatting with Ajay Shah,
#
and now finally chatting about the subject
#
of this episode, the economics and politics of vaccines.
#
So, you know, before we actually get to vaccines,
#
like one final question to set context.
#
In the last episode we did together
#
on farm bills of all things,
#
you spoke about the difference
#
between public health and healthcare.
#
And I think that's a difference, again,
#
worth underscoring as a kind of context for our listeners.
#
So can you tell me a little bit
#
about how significant understanding that difference is
#
for being actually able to grapple with this problem?
#
Public health is about actions that operate on a population.
#
Healthcare is about actions that operate on an individual.
#
For example, public health is fixing the air quality
#
of North India, and healthcare is fixing
#
the respiratory illness of one person.
#
Public health is about prevention, healthcare is about cure.
#
Public health tends to generate public goods,
#
which are non-rival and non-excludable.
#
Healthcare tends to be about private goods,
#
which are excludable and drivable.
#
So public health and healthcare are two different words
#
in the story of the field of health.
#
You know, you sent me an excellent paper
#
that you'd written for the NCAER in July last year,
#
which I found quite clear-headed in thinking about vaccines.
#
And there you asked five questions about vaccines,
#
which are sort of an interesting way to set a frame
#
for what was the problem that we faced at that time.
#
It seems like distant history now, July 2020.
#
Take me through the thinking about vaccines at that point.
#
By July, we kind of realized that there will be vaccines
#
at some point, though there were many skeptics
#
who were saying, oh, there will never be a vaccine.
#
There has never been a vaccine for a coronavirus.
#
But at some point, we kind of realized
#
that there will be vaccines,
#
and it's kind of been miraculous
#
how there actually are so many, and that's crazy.
#
But then the problem comes, what do we do with them?
#
How do we vaccinate our population?
#
Take me through the different nuances
#
of the questions you need to ask at that point.
#
We would have to think about the extent
#
to which a vaccine is useful and required
#
in changing the disease dynamics.
#
We would have to think about any prioritization questions
#
that to what extent would a pure private market work?
#
To what extent is there a role for a state,
#
and is there a role for some kinds of prioritization?
#
We would need to think about the operational
#
and institutional mechanisms
#
on how to get vaccines out on scale.
#
We'd need to think about defining success,
#
that at what point do you stop, do you just keep going?
#
And in all this, I want to add one thing
#
which is on my mind today,
#
which was not at the time of writing that article,
#
which is, are we facing a one-off
#
in the context of SARS-CoV-2 that we saw in 2020?
#
Or are we thinking of something that is going to be with us
#
for a while in a more general sense of adults,
#
epidemics and vaccines?
#
And so today my thinking is much more in favor of,
#
this is something that is going to be with us
#
in steady state, that vaccines and vaccination of adults
#
is an important dimension of the Indian health system.
#
And so we need to find long-term,
#
stable, sustainable solutions,
#
and not just think about it as a one campaign
#
to solve one problem of one pandemic.
#
And you've kind of also discussed
#
in another presentation you made later,
#
which I'll also link from the show notes,
#
where you've looked at previous pandemics
#
and you've pointed out, for example,
#
how the challenges that we were facing
#
were different from, say, smallpox.
#
And smallpox obviously was a population scale success story,
#
but we didn't require a cold chain,
#
the timescales were different,
#
we could do it over a period of a few years,
#
testing was far easier because people were symptomatic,
#
you just had to look at someone to know if they got it,
#
And similar attempts on malaria and polio
#
had much more mixed results.
#
So give me a sense of the challenges
#
that we kind of faced in sort of rolling out
#
this whole program at the start.
#
What were the challenges
#
when it came to administrative capacity?
#
What were the challenges when it came to the actual states
#
where it would be administered?
#
Give me a sense of some of these constraints,
#
and this is obviously just one aspect of it.
#
I mean, there are two ways to get all of this done.
#
One is that the state kind of does everything,
#
and the other is that the state does whatever it can,
#
but you let private players also function.
#
And we'll discuss those different approaches
#
and sort of their implications after this,
#
but just looking at the state for the moment,
#
what are we really facing?
#
Like, we are facing a state
#
which not only has severe constraints,
#
but very often one of those constraints
#
is an intellectual constraint
#
where it doesn't even understand that there are constraints,
#
and it doesn't even understand the scope of the task
#
which is being undertaken, so to say.
#
So as someone who's almost been part of the state,
#
who's worked with the state for over 20 years,
#
when you sit down and you look at the scale of this,
#
what are the pain points which really begin to worry you
#
where you sort of sit back
#
and wonder how it's gonna happen at all?
#
I talked about smallpox in that NCR talk,
#
which is going to turn into a paper soon,
#
because for me from childhood,
#
that was just like one of the most glorious moments
#
in world history and India's history.
#
Can you imagine a more horrendous disease than smallpox
#
with something with a case fatality rate like 25%
#
and where you are able to vaccinate everybody
#
in the country against it,
#
and where what we achieved as the human race
#
This is like the highest dream that could ever
#
And whenever anybody in India dreams vaccination
#
and you think big, you dream of the smallpox episode.
#
And yet the moment you start going down this route,
#
there are so many differences
#
that are holding us back today.
#
As you were check-listing,
#
the smallpox campaign was done over many, many years.
#
It was not done in a short time for whatever reason.
#
Today in the modern world,
#
we had to finish with the COVID-19 pandemic quickly.
#
We don't have the choice of saying,
#
we'll take five years over it.
#
The smallpox campaign involved a heat stable vaccine,
#
and there was no difficulty of a cold chain.
#
You could easily transport it to any corner of the country.
#
there was not this complexity of asymptomatic people.
#
So you really had to glance at the face of a person
#
and you knew that they were sick.
#
And so then you would put a ring around that population
#
and go after, so it was a more trace test,
#
isolate kind of approach that was applied
#
to keep finding pockets of smallpox
#
and getting them under control.
#
And you would also suspect that all in all,
#
the state capacity of the Republic of India in the 70s
#
was significantly superior to what we have today.
#
That's a non-obvious proposition.
#
We tend to think that because GDP is higher,
#
state capacity is higher.
#
GDP is higher because there's more capital,
#
there's more technology, there's more labor,
#
the firms are more sophisticated.
#
But if you think of the ability of an Indian state
#
in the early 70s to make up its mind,
#
to collaborate with the WHO,
#
have 50 overseas experts be living here in India,
#
collaborating and participating,
#
and running a campaign all across the country
#
My opinion is that no, today we can't do it.
#
We don't have that capability in the Indian bureaucracy today.
#
Is it a natural degradation that you would expect
#
given the nature of bureaucracy
#
and the way things play out and all of that?
#
No, it's not a natural degradation.
#
I remain an optimistic person,
#
and I think that the natural trajectory of the world
#
is that we learn and things get better.
#
But I think that over these decades,
#
the Indian state has become swamped by so many challenges.
#
And there were elements of the working of the Indian state
#
that were not institutionalized.
#
So it worked in the hands of a certain kind of person,
#
and it doesn't work in the hands of different people.
#
So we didn't build it out as an institution.
#
So the way things work today are very different
#
from the way things worked in the 70s.
#
By the way, if you have some good conversations
#
with people in the army and you ask them,
#
could you do a 1971 campaign in Bangladesh today,
#
they would offer you lots of concerns
#
that what was done in 71 was just outrageously great,
#
but that level of operational capability,
#
confidence, competence, logistics, decision-making,
#
it is harder and harder to find that today
#
So I think that there is a deeper decline of capability
#
that has been going on in the Indian state.
#
And many of us, we tend to jump to the conclusion
#
that because the GDP is higher,
#
the state capacity must be higher.
#
I think that there are many ways in which that's not true.
#
There is a book which is called Building State Capacity
#
by Lann Pritchett and co-authors.
#
They have a measure of state capacity in that book.
#
And going by their measurement,
#
they find that from the mid-90s to the middle 2010s,
#
in India's case, the state capacity actually got worse,
#
not better, while the GDP grew greatly.
#
So I think all of us need to decompose our minds
#
that you have a firm like Infosys, it's a great firm.
#
They make GDP, it's fabulous.
#
That doesn't mean that the Indian state is better.
#
So one of the episodes of The Scene and the Unseen,
#
which has been a gateway drug for many people,
#
it's not even one of the top 25 episodes of the show
#
in terms of downloads, but as a gateway drug,
#
it remains huge, is an episode I did with Srinath Raghavan
#
on the 1971 war to free Bangladesh
#
and has stunning insights on what really went on there.
#
But my question is on the why.
#
So let's say I'll take a word for it that, okay,
#
as far as the what is concerned, fine, the state degraded.
#
But why did it degrade?
#
Like, of course, I agree with the contention
#
that ideally you want institutions
#
where it doesn't matter who the individuals are.
#
Whether they are good people or bad people,
#
the institutions are robust enough
#
that everything just works.
#
And bad or good individuals only make a difference
#
One, I don't think we ever had that.
#
And two, assuming that our institutions have degraded
#
and state capacity has degraded,
#
do you have any, what are your hypothesis
#
Like, I'm just trying to understand it structurally.
#
So we came out of colonial rule,
#
which was not democratic rule.
#
And it was based on a certain conception
#
And we basically switched around that ruling class.
#
And there was a new Indian National Congress
#
and there was a new Indian civil service come IAS.
#
And they became the new ruling class.
#
The Indian population was relatively small.
#
The Indian GDP was relatively small.
#
The demands made upon the Indian state
#
that combination of autocratic rule,
#
modest population and modest objectives of the state,
#
delivered a certain level of state competence
#
And then as the years went by,
#
the Indian state got overrun with a larger
#
and larger number of demands.
#
The scope of the attempts at welfarism today
#
are of a different order altogether.
#
Adjacent institutions corroded.
#
So what was supposed to be a co-equal balancing act
#
between an executive and a legislature and a judiciary,
#
and they became more of an administrative state.
#
And the simple INC domination went away.
#
So now you have a complicated political landscape
#
where there are many different political parties.
#
And then the nature of the conversation
#
between the political leadership and the executive changed.
#
It was no longer the case that the executive was working
#
with just the Congress for long periods of time.
#
Now it became complicated that this executive,
#
this bureaucrat is friendly with this party.
#
This bureaucrat is friendly with this party.
#
So you start getting destruction of institutional memory
#
each time a new political party comes into power.
#
We are unable to manage knowledge and insights
#
across long periods of time.
#
So all these pieces, they come together.
#
There's also a new character of the people
#
that are going into civil service today.
#
In 1947, some of the best people in India
#
thought that becoming an employee of the government
#
was pretty cool, partly out of the nobility
#
and the morale of Gandhiji and Nehru
#
and partly out of simple economic considerations
#
because those were relatively well-paid jobs.
#
Today it's more or less upside down on both counts.
#
So there is a qualitative change
#
in the nature of the people that we meet.
#
I have been in policy discussions for the longest time
#
and it's not very inspiring the quality in the room
#
that you get in many policy discussions today.
#
And my subjective opinion is that when I was very young
#
and there were people in the room
#
that I used to look up to,
#
I thought that they ran better policy discussions
#
when I was the youngest person in the room
#
and the least important person in the room.
#
I used to admire the quality of the conversation
#
that used to take place.
#
I mean, one never wants to be the smartest person
#
That's not a good situation to be in.
#
A number of strands, and I'll get a little discursive here
#
and I promise the listeners I'll come back to vaccines,
#
but all of this is kind of fascinating
#
and just getting that deeper bedrock of understanding
#
And this is the degradation of the Indian state.
#
As you mentioned, it is a kind of an interesting new thing
#
that I need to think about.
#
One, you mentioned colonialism and it was just like,
#
I was just thinking today that in a sense,
#
the Indian state's abdication
#
in the face of this current crisis
#
is similar to what our British colonial masters
#
were often accused of when it came to the various famines
#
that happened through the centuries
#
where you had a natural disaster
#
and it was completely either ignored or even exacerbated
#
by the callous apathetic reaction of the colonial masters
#
who would in fact quite often just deny
#
that there was a problem at all.
#
And we've kind of seen that play out
#
and we see that play out again.
#
And I keep talking about how we didn't actually
#
gain true independence in that sense.
#
In 47, we merely passed over an oppressive colonial state
#
from a set of white-skinned rulers
#
to a set of brown-skinned rulers.
#
Only the color changed,
#
the essential nature stayed the same.
#
The other interesting aspect,
#
I was going to talk to you about fundamentally coercive nature
#
when we talk about the coercive nature of the state,
#
it seems to imply that there is a non-coercive nature
#
as well, which of course is not the case.
#
Everything the state does coercive
#
and the only question is what?
#
I think the distinction is undemocratic coercion
#
versus democratic legitimacy.
#
I think that's the interesting line.
#
That what we aspire to as a republic
#
is the legitimacy of coercion
#
that is channeled in an ethical and just fashion
#
as opposed to the rule of a few people.
#
That's an oligarchy where there is absolute power
#
Yeah, I mean, I was finishing my thought
#
by sort of expressing something along those lines,
#
which is that everything the state does is coercive,
#
except that we need the state
#
and some of that coercion is justified.
#
And all ideology really falls down on the margins.
#
Where do you draw that line?
#
And where do you decide what coercion is justified
#
And obviously, in a democracy as well,
#
the question of legitimacy comes up.
#
But speaking of coercion,
#
and you used that phrase many times
#
in both your wonderful book with Vijay Kelkar
#
and in your recent articles on this current crisis.
#
And it reminded me of Adam Smith's Man of System.
#
And I'll just read this passage out for my listeners.
#
This is from the Theory of Moral Sentiments.
#
and you'll find this person recognizable,
#
in that he writes, quote,
#
The man of system is apt to be very wise in his own conceit
#
and is often so enamored with the supposed beauty
#
of his ideal plan of government
#
that he cannot suffer the smallest deviation
#
He goes on to establish it completely
#
without any regard either to the great interests
#
or to the strong prejudices which may oppose it.
#
He seems to imagine that he can arrange
#
the different members of a great society
#
with as much ease as a hand arranges
#
the different pieces upon a chess board.
#
He does not consider that the pieces upon the chess board
#
have no other principle of motion
#
besides that which the hand impresses upon them,
#
but that in the great chess board of human society,
#
every single piece has a principle of motion of its own,
#
altogether different from that which the legislature
#
might choose to impress upon it.
#
Stop quote, a sort of version
#
of what Hayek called the fatal conceit.
#
And we see that our founders in a sense,
#
or at least the influential founders,
#
which is why we have all the central planning.
#
The state is gonna do everything.
#
And as you point out that
#
it's a much more manageable task in the early years
#
compared to what it later became.
#
So I'd assume that that's sort of one aspect of it,
#
that if you are, you know,
#
if you think like a man of system,
#
you just have less chess pieces to move
#
and less things going wrong.
#
Whereas in this globalized world,
#
there are so many influences.
#
There's a distinction we should make
#
between a Lenin and a Stalin versus a Putin, okay?
#
So in a Lenin and a Stalin,
#
there is this grand design.
#
You may disagree with that grand design.
#
There is a grand design
#
and there is an extreme ideological willingness
#
to inflict cruelty upon the people
#
because I know I'm right
#
and I'm going to build that grand design.
#
So why did Stalin do collectivization?
#
It made no sense for him in any pragmatic sphere,
#
but he was an ideologue.
#
He was not just an ordinary tinpot dictator.
#
So that's the distinction that there is an ideologue
#
who sees a dream and pursues some utopian ideal.
#
And you and I would challenge the capability
#
and legitimacy of anybody who tries to tell us
#
to live our lives going by their utopian ideal,
#
but that's a separate point.
#
But there is intellectual approach
#
of a Lenin and a Trotsky and a Stalin,
#
which has a certain kind of barbarism
#
and a certain kind of consequence
#
in terms of transforming society,
#
because the fact remains that the USSR
#
went from a semi-Asian society in 1917
#
to the world's greatest land power in 1945.
#
So something transformative happened
#
at a horrendous human cost.
#
And then you get to Vladimir Putin, okay?
#
Who's really just all aparachic and no philosophy.
#
So Putin has no idea about what is the design of the world,
#
but it's just a game of power.
#
The only game is that he and a few others
#
would like to concentrate power upon themselves,
#
would like to constantly identify anybody else
#
who commands influence and destroy them.
#
And that creates the silence of a graveyard
#
So it's interesting to look at the world from this lens,
#
that there are the central planners
#
who have some dream world
#
and often lead their world into ruin,
#
and that's Pol Pot, okay?
#
He was a visionary that led the country into ruin.
#
And then there are just, yeah, or Mao.
#
And then there are just elementary marquess
#
who are just ordinary tin pot dictators,
#
where it's just a game of always and always
#
accumulating power, grabbing power, monopolizing power,
#
and shutting off every other energy and thinking
#
and disagreement in the economy.
#
And I think these are two different kinds of pathologies
#
That's a very fine nuance,
#
and it strikes me that obviously,
#
one, I think our current rulers,
#
and I'll use the term rulers
#
because I think we are more subjects and citizens
#
the way this country is today.
#
Our current rulers are more in the Putin mold.
#
I'd add to that and say that the obsession
#
of, say, Modi and Shah is not so much governance,
#
as you'd imagine it should be in a democracy
#
because how else do you win elections?
#
But is winning elections,
#
which has nothing to do with governance,
#
actually it's all about narrative building.
#
So they are all the time focused on elections
#
and narrative building,
#
and that's what it's all about.
#
And they can control that,
#
and what the reality is doesn't matter
#
as long as you can weave a story around it.
#
And the other thing here that strikes me is that,
#
listen, you can win elections with central planning.
#
What Amit Shah did, in fact, as a campaign manager in 2014
#
is a staggering feat of management
#
in terms of reconfiguring all those caste vote banks
#
through UP, Maharashtra, everywhere, what they did.
#
I mean, I had an episode on that with Prashan Jha as well,
#
who wrote the book, How the BJP Wins.
#
Staggering peace centrally done, but you can do that.
#
At the level of controlling a party,
#
you can do that at the level of controlling a country.
#
Can't really plan things centrally.
#
And you could argue that at one level,
#
their intensity of effort never quite went into governing
#
as much as elections because the two really aren't related,
#
and unless things get really bad
#
and you just want to win the election
#
and control the narrative.
#
Here's another interpretation.
#
Imagine central planning and top-down management
#
being applied into both pathways
#
with equal zeal and vigor.
#
But incentives, because-
#
It just delivers better results in one than the other.
#
Yeah, because a party is a manageable beast,
#
It's just too many pieces on the chessboard,
#
as it were, to go back to Smith's Man of System analogy,
#
which is why something like, for example,
#
if the same zeal had gone into rolling out vaccinations
#
we would honestly not be in that situation right now,
#
the situation that we are in.
#
I think that's part of the issue.
#
And part of the other issue is that even that
#
would only solve part of the problem,
#
that this whole Man of System approach,
#
central planning, top-down approach wasn't sufficient,
#
as you have pointed out,
#
that there were different approaches
#
you could take with vaccinations.
#
Only one approach was the state does everything.
#
And there, of course, it didn't do enough.
#
But the other approach, also,
#
was that you harness private enterprise,
#
and you also, side by side,
#
allow them to kind of work with you.
#
But maybe I'm kind of shifting ahead in the narrative.
#
But these are the two broad policy choices
#
that policymakers face, right?
#
So tell me a little bit about what this choice was like,
#
and was it inevitable that,
#
in our culture of top-down, central planning,
#
state does it, the state controls everything,
#
that we would just say,
#
no, the state will do it, and, you know,
#
our subjects will line up and take their vaccines
#
and we won't allow private players in here.
#
What was the sort of thinking like?
#
What were the pulls and pressures?
#
So in countries like Israel and the US and the UK,
#
the central government equivalents took charge
#
and built large-scale vaccine rollouts, okay?
#
And regardless of what you may think or I may think,
#
those things, by and large, worked, okay?
#
So they had their critics, they had their problems.
#
Every centrally planned system has its own complexities.
#
Let me give you an example.
#
Every centrally planned system will have a bright line rule
#
like we will do above age 45, we will not do below age 45.
#
Whereas, actually, what you need is far more nuance.
#
What are your co-morbidities?
#
What is your social life?
#
Does your occupation involve meeting more people
#
So any simplistic bright line rule will do badly,
#
whereas if people make more decisions for themselves,
#
they'll do better, okay?
#
So you can and should criticize
#
every centrally planned system.
#
Similarly, in the United States,
#
what is appearing to be a central system
#
actually involves contracting with private people
#
and getting the job done in, you know,
#
what you might see is a remarkable feat
#
of government activism.
#
So first, the government played a role in funding research
#
and funding manufacturing by vaccine manufacturers.
#
At a time when there were risks,
#
the government could have come out blank
#
with that money wasted and no vaccine, okay?
#
So they had the government systems that had the capability
#
to not stand back, to not wait for private people
#
to pay the risk, but rather to put up risk capital
#
and say, here, we're funding research,
#
or here, I'm giving you an advanced purchase contract
#
so that a lot of work on vaccine research
#
and vaccine manufacturing got done ahead of time.
#
So that was the first milestone
#
of what the United States government did right.
#
And then, barring a few missteps
#
which got fixed along the way,
#
it has worked out into a pretty private sector system.
#
So the United States government enters
#
into a contract with Pfizer,
#
then the United States government has a contract with UPS
#
to do the cryogenic transportation from Pfizer's factories
#
to the Walgreens and CVS shops on the roadside, okay?
#
And the United States government has a contract
#
with the Walgreens and the CVS
#
to push vaccine into the arms of people.
#
And then the United States government has a mechanism
#
to reach out to various people, say, it's your turn,
#
to set up a booking system, a reservation system.
#
So the point is that there was energy in their country
#
for cryogenic transportation, for vaccine R&D,
#
for vaccine manufacturing,
#
and for the last mile vaccination in the private sector.
#
All this energy was harnessed in a collection of contracts,
#
and that's how they did it.
#
But right now, I just want to harp on one point
#
which is nothing succeeds like success.
#
At the bottom line is that the highly centralized approaches
#
of the US and the UK and countries like Israel have worked.
#
I respect those countries.
#
I respect the policy choices
#
because the bottom line is it worked, okay?
#
And if hypothetically in India,
#
we had had similar levels of state capability,
#
then I would not be so stuck on ideology.
#
So what I was writing and arguing in late 2020
#
was a practical point, was a pragmatic point
#
that look back at smallpox.
#
Look back at the glory of the Indian state
#
that was able to eradicate smallpox in five years
#
under higher levels of state capacity.
#
And now compare that against where we are today.
#
And do you think you'd be able to pull this off?
#
Okay, so here's a counterpoint.
#
There are some 25 million infants
#
who are born in India every day,
#
and a somewhat larger number of mothers.
#
And ever since independence,
#
there has been an attempt to try to bring down
#
the maternal mortality rate and the infant mortality rate
#
by getting vaccines out to mothers and infants.
#
And as of today, the coverage is like 60, 80%.
#
So at the end of all these years,
#
we don't have a comprehensive success
#
with a small problem of 25 million infants.
#
And my first law of management,
#
my first law of public administration
#
is that if you don't know
#
how to do a 25 million problem today,
#
odds are you will not succeed
#
on a 50 million problem tomorrow.
#
And what was needed was a 500 million
#
or a 1 billion problem.
#
My argument last year was that this is a problem size
#
that will elude the Indian.
#
from the public administration problem
#
to most fundamental economics of a vaccine.
#
If we had to think from scratch,
#
do we really need a lot of state in the vaccine?
#
And the answer is not a whole lot
#
because there is a substantial sense
#
in which a vaccine is not a public good.
#
A vaccine falls under healthcare,
#
it's not under public health.
#
A public good is something that is non-rival
#
A vaccine is rival and excludable.
#
If I get a dose of vaccine,
#
that particular dose is not available to you.
#
And I can't shut off access
#
to a newborn child of the vaccine.
#
So a vaccine is absolutely a private good.
#
There is a market failure
#
and that market failure is an externality.
#
What is going on is that when I get vaccinated,
#
I impose some benefits upon you
#
because when you and I have a social interaction,
#
the disease is less likely to come to you
#
because I am walled off.
#
So each person that gets a vaccine
#
imposes a certain amount of benefits upon bystanders.
#
Now, the overall gains to society when I get vaccinated
#
are higher than my personal gains for myself.
#
So as with other classic positive externality problems,
#
we have a mismatch between the individual incentive
#
and the incentives of society.
#
The individual is likely to under invest in vaccination.
#
So some people have enough private interest
#
that they will pay the price of vaccination
#
and they'll do it for themselves.
#
because their personal incentives are not strong enough
#
to pay for it on their own steam
#
and they don't give a damn
#
about what's happening to everybody else.
#
And there is a role for state intervention
#
potentially to change that.
#
Okay, so that's the market failure perspective on vaccines.
#
The third, an epidemiological perspective on vaccines
#
teaches us that you actually don't need
#
every single person in the country to be vaccinated.
#
You only need enough people vaccinated
#
to change the disease dynamics.
#
So we should always think of a combination
#
of people developing resistance to a disease.
#
You can either get sick and get immune
#
or you can get vaccinated.
#
what happens is that at the end of it,
#
generally you are now protected
#
and you are no longer available
#
for the spread of the disease.
#
So we should always think that there are two highways
#
where people are riding on.
#
Some people are getting sick and thereby getting immune.
#
Some people are getting vaccinated
#
and thereby getting immune.
#
And when the two add up to something
#
like 70, 80% of the population,
#
the basic mathematics of the disease changes
#
and the disease rapidly dies away
#
until a new variant comes along.
#
And I will come back to new variants
#
later in the conversation today.
#
So in this full picture,
#
what we need to think is that case one,
#
could we do a highly state-led program
#
to push up to herd immunity?
#
Probably that's not a very feasible path
#
under Indian conditions.
#
Point two, do we even need
#
a completely state-driven program
#
based on first principles,
#
public economics and public health,
#
reasoning about this problem?
#
That is a private good with an externality.
#
Whenever a person like you or I
#
is able to pay 5,000 rupees and get the vaccine done,
#
it's the perfect answer.
#
There's nothing wrong with it.
#
The more people that get it, the better
#
because you're reducing the susceptibles.
#
And also the third point is to recognize
#
that the very spread of the disease
#
is actually reducing the mass of the people
#
The current clinical guidelines
#
are that if you've got sick once,
#
you need one dose of Covishield and not two.
#
And that has a huge impact on the arithmetic of doses
#
that everybody's counting 1.4 billion people
#
multiplied by two is 2.8 billion doses.
#
That's not a correct calculation,
#
partly because you don't need to cover 100%.
#
Partly because for everybody that gets sick,
#
you don't need two doses, you need just one.
#
And partly because while the program is running
#
and is on its path to completion,
#
the differential equations are going to change
#
their behavior and the epidemic is just going
#
to abruptly vanish like Donald Trump promised us
#
So a bunch of things that I want to kind of unpack there.
#
You know, one fundamental aspect of this,
#
which is what is the role of the state.
#
Now, even someone who supports free markets like me
#
and believes the state should not be in most things
#
just through the rule of law,
#
would say that there are certain things the state must do
#
where we need the state.
#
Most libertarians also would say that
#
you need a minimum government that among other things
#
can fight wars, can save you from invaders outside.
#
And my question really here is that we are at war
#
It's not Pakistan or China or whatever,
#
but we are at war with this virus.
#
And therefore, if the state is there to protect our rights,
#
which is the fundamental reason for it to exist
#
in the first place, it has to protect our lives.
#
It has to take care of this aspect of things.
#
Now, the problem here is that state capacity
#
as you've pointed out is far better
#
in the Western countries.
#
For example, if you look at the way
#
the American government responded,
#
I think aspects of it are just outstanding.
#
For example, what they did in the middle of last year
#
like you said, was they made deals with companies
#
who were working on vaccines,
#
giving them advance orders, giving them grants,
#
therefore incentivizing them to keep going.
#
It was not conditional upon whether the vaccine will work
#
It was just that we'll throw money at the problem.
#
You build your capacity, you carry out whatever,
#
let money not be a constraint.
#
We are there, we'll spend the money.
#
And that's absolutely necessary.
#
In this case, you need a government
#
that they were wise enough to realize
#
that you spend billions today to save trillions
#
because that is a cost to the economy,
#
which is why it's completely fundamental to me
#
that anyone who wants a free vaccine in India
#
should be able to get it.
#
This should not even be up for debate.
#
Now, the issue here is when it comes to India
#
is that our state capacity is abysmal
#
and that has consequences.
#
Now, you've also pointed out that in the case of testing,
#
where initially the state said,
#
hey, we will do everything, no private testing.
#
And because of that, testing was much slower
#
than it should have been.
#
Data was worse than it should have been.
#
And a spillover effect of that possibly
#
was because of lack of adequate data,
#
we underestimated how bad the second wave would be
#
and what we needed to do to prepare.
#
And once you had private testing come into play,
#
things became much better.
#
So the state capacity simply wasn't there.
#
So this is not an either or situation.
#
What people like you and, you know,
#
I wrote about it back at the time, you know,
#
Shruti, Mihir, all of them were writing about it.
#
What you really need is that the government
#
and I use that phrase with some thought behind it,
#
goes on a war footing against a virus
#
and tries to vaccinate as many people as it can.
#
But at the same time, you enable the private sector
#
to do what it will, import whatever vaccines it has to,
#
One of the interesting nuances you pointed out there
#
is that when the state is doing something,
#
it will have these blunt heuristics,
#
that, okay, who do we vaccinate first?
#
The elderly are the most, so first over 60, then over 45.
#
And I was chatting the other day
#
with our mutual friend, Ruben Ibrahim,
#
who threw the question that who should we vaccinate first,
#
the vulnerable or the spreaders,
#
the people most likely to spread?
#
And if there is also a case to be made
#
that, hey, it's the spreaders who we need to vaccinate
#
as soon as possible, how do you get it done?
#
If you are to make the case that, you know,
#
people in the slums might already have some level
#
of seroprevalence and they've already got it,
#
it's people in the high rises, the elites,
#
who are now in fact suffering the brunt of the second wave,
#
who need to be protected, how do you do it?
#
And the answer there is that you let them buy it.
#
You let private providers get into play,
#
companies will provide it for their employees.
#
Like you pointed out in one of your articles
#
that why would an airline not say that
#
all my frequent flyers will vaccinate them?
#
You know, why would a cooperative housing society,
#
which is today organizing groceries at particular times
#
during the lockdown, not say that, hey,
#
we'll do a vaccine drive?
#
And that never happened.
#
And that is just so incredibly short-sighted
#
Would you like to add to this?
#
So I feel that from the viewpoint of public health,
#
in some ideal world, we would say that it is our objective
#
to put an end to this pandemic.
#
And so we need to push hard on vaccination
#
to the point where the disease dynamics changes
#
and it will go away with a whimper.
#
So I agree with you completely on that.
#
Whether you think about this in terms of the justice
#
and protecting the people and protecting rich and poor alike,
#
or you think about this in terms of pragmatic viewpoints
#
saying we're losing trillions of rupees in this rubbish
#
and we should be willing to commit resources
#
in order to solve this.
#
So I'm completely with you on this.
#
I feel that where we went wrong in India
#
was on a couple of bottlenecks.
#
The first was that somehow,
#
and I have really not been able to understand
#
where this comes from, somehow the health policy community
#
in India has accumulated an idea
#
that we must never import vaccines.
#
For the life of me, I'm not able to understand.
#
We import mobile phones, we import wristwatches,
#
we import food, we import clothes,
#
we import everything under the sun today.
#
But an old Nehruvian hostility to import of vaccines
#
is the order of the day
#
when it comes to health policy people.
#
And it has proved to be an extremely costly blind spot.
#
that I believe there was an example,
#
there was a situation where a global vaccine provider
#
who has been green-lighted by drug safety authorities
#
in many OECD countries was actually denied permission
#
in India on the grounds that their product is not safe.
#
Now that doesn't make any sense.
#
So first of all, we have no great drug safety procedures
#
There's all kinds of stuff that gets through.
#
And it's not like we are more stringent
#
and that we run higher standards
#
than what I've seen in some other countries.
#
And yet was it some hostility to import of vaccines
#
where we actually closed the door on,
#
I forget the name, some foreign vaccine,
#
just a couple of months ago, this little drama took place.
#
Last year in October or something,
#
Pfizer actually tried to come into India
#
and the Indian government said,
#
no, you have to do trials first.
#
And they were like, forget it, let's just go.
#
So there is one, there's some blinkers
#
in the field of health policy.
#
And this goes back to what I was saying earlier
#
that what we lack in India is a health research community.
#
We lack a health policy community.
#
We've just got amateurs.
#
I mean, they're doctors.
#
I want those people to cut open my rib cage
#
when I have a heart attack,
#
but I don't want them to do health policy.
#
This is a serious problem.
#
Trust me, after listening to this,
#
they want to cut open your rib cage right now.
#
So there was certain blind spots on these kinds of questions.
#
The second idea was that I feel for too many people
#
in India in the policy process,
#
there is not the elementary care around state coercion.
#
Okay, so for our thinking in public policy,
#
we baseline on freedom.
#
Our default setting is every human being is free
#
and we should do as we like.
#
And then we checklist the nature of state coercion,
#
that this is banned, this is banned, this is banned.
#
These are all the ways in which the state is coercing us.
#
And we wonder, why do you have that coercion?
#
Why do you have that coercion?
#
Is there a market failure?
#
Is this an effective coercion?
#
Whereas what happened with the Indian state on vaccination
#
was that there was a whole array of state coercion
#
that was put into place.
#
Without thinking too much
#
about whether that is justified or legitimate.
#
And that may be the DNA of the Indian state
#
Maybe this is actually how things are being done
#
So the lack of application of mind
#
before coercing private people,
#
I feel is what was at fault.
#
So almost without noticing it,
#
there would be some junior functionary
#
who would put out an order to Serum Institute
#
that we prohibit you from selling to any private person.
#
And then suddenly you've got an environment
#
where private persons are prohibited from importing,
#
private persons are prohibited from buying from Serum.
#
And then we are in the grip of only one channel,
#
that is the union government led immunization effort.
#
And if it had worked, great.
#
But you know, people putting all eggs in one basket.
#
So I think for all of us for the future,
#
there are some larger meta lessons
#
and the three meta lessons that I would encourage us
#
to think about is that we should consider it possible
#
that there can be state failure.
#
We should not put all eggs in one basket.
#
We should always have many, many initiatives
#
that seek to get the same thing done.
#
And we should set a high bar for knowledge and certainty
#
and consensus and democratic legitimacy
#
before we roll out state power that coerces people.
#
But our default should be freedom.
#
Our baseline should be freedom.
#
Just to take you to a sidetrack,
#
imagine you're sitting in some corner of rural India
#
and you spend $500 and you buy the base station equipment
#
of Elon Musk broadband internet provider,
#
which is called Starlink, okay?
#
And you get 100 MB per second to the internet.
#
There's no market failure.
#
You're not harming anybody.
#
You're all alone in a rural area
#
and you're willing to pay $100 a month
#
and you've got yourself nice, shiny broadband connectivity
#
into any corner of the country.
#
Our presumption should be,
#
look, you're not harming anybody else.
#
Go do whatever the hell you want, okay?
#
So consenting adults should be free to do
#
You are paying $100 a month to Elon Musk.
#
But I suspect that by default,
#
some Indian state employee right now is thinking,
#
no, no, no, no, no, no.
#
First, Starlink has to come and take permission from me.
#
Without that, they can't sell this product.
#
So I feel that's the gap that we have to cross,
#
that the default should be freedom
#
and the exception should be interference in freedom
#
I'm not an expert on the constitution of India,
#
but I believe there are some elements of the drafting
#
of the constitution that say this,
#
that in the land of the free in the Republic of India,
#
freedom will be the default
#
other than democratically authorized interference
#
in freedom by the state.
#
And it's very amusing that there are some laws in India,
#
which actually start right at the outset
#
Laws that say, first, everything is banned
#
other than what I permit.
#
And here's a list of narrow permissions that I give you.
#
So it's very interesting that the parliament
#
has actually flipped around the concept
#
of constitutional freedom that was adopted
#
by the people after the constituent assembly.
#
And that concept really didn't last long.
#
Like I had a great episode on the first amendment
#
with Rupur Daman Singh, where you realize how right,
#
early at that time, everything was getting flipped around.
#
Like the sedition law, which we have with us,
#
such a terrible colonial era law was actually struck down
#
by the courts in 1950, if I remember correctly.
#
And then Nehru brought it back with the first amendment
#
because he wanted to handle his political enemies.
#
So for all those who think of him
#
as a sort of a great liberal,
#
well, in some ways he was because we contain multitudes,
#
but in some ways he was also deeply illiberal.
#
And you mentioned the phrase consenting adults.
#
So I'll just kind of express a pet peeve of mine here
#
is that many of us somehow seem to think correctly
#
that no one should interfere
#
with what two consenting adults do with each other
#
as long as they're not harming anybody else
#
in the domain of your home, in the domain of your bedroom.
#
So if you and I are having a conversation
#
and we're not harming anyone and the government barges in,
#
we would correctly be outraged.
#
But somehow when it happens in the marketplace,
#
when two people are having an interaction
#
to mutual benefit and not harming anybody else,
#
then suddenly it's a government's business
#
and you'll make all kinds of justifications for it.
#
And to me, interfering there is as much morally wrong
#
And it is not that there should never be coercion,
#
if you consider all coercion to be morally wrong.
#
A little bit of coercion is necessary
#
to safeguard our rights, which is why the state exists,
#
but nothing beyond that.
#
It's this really complicated thing
#
where in our personal lives,
#
if an individual came and did something to me,
#
But somehow the state has the right to do it.
#
And we don't question that
#
and we don't think hard enough about it.
#
But to sort of get back to the questions of vaccines
#
or in fact, yeah, sorry.
#
So on vaccines, I want to complain to you and to me
#
and to all of us who are hearing this podcast.
#
I'm aghast at how little all of us do as individuals
#
on getting more vaccines.
#
Somehow it is coming to our head
#
that the government runs some smallpox vaccination
#
and some kids get vaccinated.
#
And apart from that, vaccines are not part of our world.
#
that's really a personal selfish mistake by each of us.
#
Every boy and girl at age 12 should get an HPV vaccine.
#
It's in your self-interest.
#
You should put down good money and get it and so on.
#
So there are so many good vaccines
#
that are available in the world today that will protect us.
#
By the way, I only recently discovered that abroad
#
there is a good dengue vaccine.
#
The next time I travel abroad,
#
I very much plan to get the dengue vaccine.
#
It's not available in India,
#
but it is available abroad and so on.
#
So I feel something went wrong in our thinking
#
for all of us as a community
#
that we were not doing this hard-headed
#
first principles thinking about what's a public good,
#
And I benefit when I get a vaccine against SARS-CoV-2
#
and I should be willing to put a price to that.
#
And each of us can debate, what am I willing to pay?
#
And then it just becomes a normal marketplace
#
and normal market forces will work
#
where you'll pay a little more to have somebody come
#
administer the vaccine in your arm at your home.
#
You'll pay a little more for an air-transition facility.
#
You'll pay a little less for a facility
#
that's out in the open, blah, blah, blah.
#
I mean, just normal machinery of markets would do vaccines.
#
And I just fail to understand
#
why that has not taken root on a bigger scale.
#
And I would plead to all of us
#
that there are so many good vaccines out there.
#
We should be getting these things.
#
You spend some money on a vaccine.
#
You rule out a disease for X years and we become healthier.
#
All of us should do it.
#
So, speaking of sort of free lunches,
#
and I'm coming to a weird question with this,
#
but I think we both agree
#
that we should do regulatory free rolling
#
in the sense that by and large,
#
America's FDA just over-regulates massively
#
and that has a cost and that's a subject
#
for a different episode.
#
You can't get more stringent than that.
#
European regulators also often overdo it.
#
They're incredibly stringent.
#
So why the hell don't we free roll on the work
#
when we don't have enough state capacity
#
if they have approved something?
#
We should just bring it in.
#
It should be an automatic approval,
#
especially at a time like this
#
where you can't afford to wait
#
and this kind of vaccine nationalism
#
that ne atma nirbhar and we will make it ourselves
#
seems problematic to me and it also strikes me
#
that is there a danger you think
#
and I'm thinking aloud here
#
that you can become a slave to your own message.
#
For example, if you are a government
#
which is always thinking of narrative,
#
thinking of national pride,
#
which is one of the core narrative elements
#
of this particular dispensation
#
and if you're always thinking
#
in terms of core national pride
#
and out of that among other things
#
emerges made in India, emerges atma nirbhar,
#
then you become a slave to the message.
#
So when you have a crisis like this,
#
you are still thinking made in India,
#
you're still thinking atma nirbhar
#
not out of any deep belief
#
which is backed by either reasoning or data
#
but simply because that's part of the marketing narrative
#
and now your product has to fit that marketing.
#
So do you think that there is sort of a reflexivity
#
and interplay here as well?
#
A wise man once said that
#
if you try to grab for happiness, you will be unhappy
#
and the path to happiness lies in letting go
#
and living for some higher things
#
and finding purpose in your life
#
and the happiness will come.
#
So if you become too desperate
#
and chase and run the rat race,
#
you're probably not going to be particularly happy.
#
So in similar fashion, I think great countries
#
A great country becomes great almost for free
#
Whereas if we try too hard to puff ourselves up
#
and claim that we are great,
#
then we're going to lose something essential
#
Let's kind of come back to the current situation
#
that on principles we've agreed
#
that this is what they should have done,
#
that the state does what it has to do.
#
In fact, it goes on a war footing
#
to try to vaccinate as many people
#
as it possibly can for free,
#
but it also allows the private market
#
And as you pointed out,
#
that would mean instead of two vaccines,
#
which is becoming three,
#
but instead of two or three,
#
we'd probably have the whole array of them,
#
which therefore that greater diversity of vaccine
#
also leads to a higher level of protection.
#
Now that didn't happen.
#
Now take me through the chronology,
#
as it were, chronology.
#
Take me through the chronology
#
of what's been happening here
#
with the Serum Institute.
#
Like one of the early things that we heard
#
that they're going to offer the vaccine
#
at 150 rupees to the government,
#
but they were planning to sell it in private
#
which I thought was perfectly acceptable
#
because many people like myself
#
would happily have paid that thousand
#
and they were going to plunge it back
#
into building more capacity
#
and sort of ramping it up
#
because as you've pointed out,
#
they need to make about two or three times
#
as many vaccines per day as they do now.
#
And that excess capacity requires investment
#
and allowing them to sell it to private parties
#
would have allowed for that,
#
but that route was completely cut off.
#
So take me a little bit through the chronology
#
of what's been happening in the last four or five months
#
as far as the vaccinations are concerned.
#
there was a debate around these things
#
and the decisions of the key persons were
#
that we will use state coercion.
#
We will block private purchase from Serum Institute.
#
All the output that Serum Institute sells in India
#
shall be sold only to the union government
#
and only the union government
#
will go all around the country
#
delivering the vaccine doses
#
through state governments and hospitals
#
And there will be only one IT system called Coven,
#
which will harvest your data as well.
#
And this is the union government led vaccination program
#
By April, it was becoming clear
#
that this had not worked out too well.
#
The New York Times has a tracker
#
where you can go and compare the work
#
of alternative countries.
#
And I remember when I wrote an article
#
about this short while ago,
#
you could sort the list of countries
#
by the fraction of the population that has got two doses
#
and this was ranked 62 in the world.
#
And this was particularly unlucky
#
given the fact that India was supposed to be
#
one of the world's great manufacturers of vaccines.
#
So this was a case where we could start to see
#
that in the Indian private sector,
#
there was a production capability,
#
namely Serum Institute,
#
which had the business and intellectual genius
#
of understanding that there was a story going on here
#
of finding a contract with AstraZeneca
#
So I feel we claim that it's an Indian vaccine.
#
There's a manufacturing facility here in India,
#
but honestly credit where it is due,
#
it was AstraZeneca and Oxford University
#
that developed the vaccine
#
and Serum Institute had the smarts to contract with them
#
and they were able to build a reasonable production capacity
#
and the remainder of health policy broke down.
#
So the remainder of health policy
#
was not able to solve this puzzle correctly.
#
So they were presented with a jigsaw puzzle in late 2020.
#
They were given a choice
#
between three alternative pathways
#
and they chose the wrong room in the house.
#
And so by April, it was becoming clear
#
that these choices had not worked out.
#
Then I think on 17th April or 19th April,
#
there were a batch of decisions
#
where I feel in significant part,
#
they are on the right track.
#
And I want to carefully describe what was done
#
and I also want to defend what was done
#
because there is a certain kind of sentiment in the country
#
that is unhappy with this work
#
in a way that I personally think is unfair.
#
And I feel we need to grapple with that debate also.
#
And at the same time, in this position,
#
there are certain elements of state coercion
#
that I think just don't make sense.
#
So what were these announcements?
#
Step one, they said that organizations
#
other than the union government are now allowed
#
to have their own energy and think about vaccination.
#
banning is the norm and freedom is the exception, okay?
#
So now the government has given you the freedom
#
that Amit Verma can organize the club of guests
#
that have ever appeared on the scene and the unseen
#
and we can run a vaccination party at Shivaji Park, okay?
#
So that you now have the permission to do that
#
if you should so decide.
#
Element two, you are free to import vaccines for that purpose.
#
So state governments and private persons
#
are now free to import vaccines for the first time
#
that freedom is now given to private persons, okay?
#
And I think all this is good.
#
Next, they have a remarkable set of industrial policy
#
and central planning rules upon vaccine makers in India.
#
So they say, whatever serum makes,
#
50% of that shall be sold to me
#
okay, without mention to the price.
#
And out of the remaining 50%,
#
serum is able to sell to state governments or private people
#
and they leave that question intact.
#
Alongside that, there was supposed to be a lot
#
of informal pressure by the government upon serum.
#
I'm just reporting newspaper stories.
#
So in the end, Serum Institute came out with a formula
#
where they said that we will sell to the union government
#
at 150 rupees and state governments at 400 rupees
#
and private people at 600 rupees.
#
Okay, and I think yesterday or the day before
#
they announced that for state governments,
#
we'll bring it down from 400 rupees to 300 rupees, okay?
#
And none of these are market-based decisions.
#
So we have an old idea in economics
#
that there should be a law of one price.
#
Everything should be traded at one single price,
#
partly because now you're needlessly creating a black market
#
and partly because you're getting the wrong incentives
#
that serum will only respond to the marginal price
#
and these constraints that if they increase capacity,
#
half of it will go to the union government at a low price
#
that messes with the gains to serum
#
from increasing their capacity.
#
So that's where we are.
#
Alongside all this, we have to worry that in the short term,
#
vaccine manufacturing is not easy to change quickly.
#
So the short-term price elasticity is low,
#
but in the medium term, the price elasticity will show up.
#
So in time, the global manufacturers
#
and the Indian manufacturers will respond
#
and will produce more when price signals come.
#
But as long as the price signals don't come,
#
we will not get higher quantities into India.
#
So I would love to campaign
#
and I would love to make T-shirts and sell them,
#
which say that supply curve slope upwards,
#
that if you pay a higher price, you'll get bigger quantities.
#
It's a revolutionary insight.
#
If you think there's not enough vaccine in India, pay more.
#
It's a revolutionary idea that by paying more,
#
you can get larger quantities.
#
Right, we'll go to the positive implications of these
#
and there are many, but first,
#
the continuation of a certain kind of coercion
#
also has negative implications
#
and that leads me to a question.
#
One point that you have, for example, made
#
is that foreign companies are, at this moment,
#
nervous about coming to India, nervous about coming here
#
because they don't know what is the legal risk,
#
how is the regulatory environment going to change,
#
will price controls come?
#
In all of this uncertainty,
#
to actually invest in anything becomes a problem.
#
Now, my question is this,
#
when we just look at the Serum Institute,
#
I think both you and I should agree
#
that they should be allowed to make a reasonable profit
#
and the government should just pump whatever money it can,
#
because one, it is the state's imperative
#
to just vaccinate as many people as fast as possible
#
and people who can pay for themselves can,
#
but otherwise, just pay for it.
#
And also, Serum should be messing around too much
#
with, oh, they are making so much profit.
#
But the problem still comes up is that,
#
what are the heuristics that we then apply
#
to arrive at what the right price is?
#
For example, there is no market, right?
#
There is no supply and demand
#
and it doesn't even apply here
#
because we agree that it needs to be done
#
So what is the right price?
#
People are complaining about 150, 600, 400.
#
They got a lot of mockery for saying
#
they're coming down from 400 to 300
#
for philanthropic reasons,
#
which was a badly worded tweet, I would say.
#
For example, if Serum was to say 2,000 per dose
#
obviously that would be a little bit ridiculous
#
and even if we agree the state should spend
#
that would be completely ridiculous.
#
At the same time, to say that give it at cost price,
#
if they were to say that whatever that cost price is,
#
would also be ridiculous
#
because then you're changing the incentives completely
#
and in a future pandemic,
#
we could be even worse prepared
#
because they would not have ramped up their capacity
#
and so on and so forth.
#
So what possible heuristic can they be?
#
Because it seems to me that there is now
#
in the mind of the common person,
#
frankly, even in my mind,
#
this just seems like some kind of absurd drama
#
that I'm giving to someone at 150, someone at 300,
#
someone at 600, like what the hell is going on?
#
Yeah, if Serum was the only manufacturer
#
of this vaccine in the whole world,
#
then the market failure would be market power
#
and then we would be singing the language
#
that here's a monopolist,
#
they're restricting output and jacking up the price
#
and we'd be thinking about, you know,
#
a competition commission class of remedies
#
on how to deal with that problem, okay?
#
And it's a tricky problem, it's a difficult problem.
#
Luckily, we are actually at an extremely sensible place
#
today that today there are an array of choices
#
in the world market for vaccines.
#
So Serum is absolutely not a monopoly.
#
So let me just run through a sense of the market
#
so you'll see what is there.
#
There is a one dose Johnson & Johnson vaccine.
#
Please note, it's very convenient for remote rural India,
#
Then there is Pfizer and Moderna,
#
which have a problem that they require cryogenic cold chain
#
but it's very solvable.
#
India is a big enough, rich enough country
#
that the customer can absorb all these costs.
#
I will say number four is AstraZeneca
#
because there are actually many, many ways
#
in which AstraZeneca stuff is being made all over the world.
#
Serum is not the monopoly,
#
Serum is not the only AstraZeneca vaccine.
#
And my tentative fifth is Sputnik, the Russian vaccine.
#
While there are some concerns about their testing results
#
and while no advanced economy has as yet licensed Sputnik,
#
my opinion and my hearsay from good scientists
#
is that Sputnik is a decent vaccine.
#
Which is not what I would say about the Chinese vaccine
#
where things are much less exciting.
#
It does protect but it protects less
#
than at least these five.
#
So there are at least five significant vaccine players
#
And they respond to business imperatives.
#
So I believe one of them was told by India
#
that we will not license you.
#
So we will not allow you to sell in India.
#
Similarly, some of them are going to say
#
that you need to protect us from some kinds of liability.
#
And again, we need to align with international norms
#
and frameworks that if a vaccine is licensed
#
for emergency use and then there are some adverse events,
#
you need to have some concept of product liability
#
that generates a meaningful level of risk
#
for the corporation and not have crazy levels
#
of risk for the corporation.
#
I don't know what the answer is.
#
I will just say we should align with what
#
the great economies of the world do.
#
So as to make all the five compete in the Indian market.
#
At the end of that competition,
#
I will shut up and accept the price.
#
If it says 5,000 rupees, I'll say fine.
#
If it says five rupees, I'll say fine.
#
I will not try to have a judgment on what is the price
#
over and beyond what a competitive market
#
of at least five players is saying today.
#
And we ain't done, because it is not the end at five.
#
There are other vaccine projects that are coming.
#
There is one called Novavax,
#
who also has a manufacturing contract
#
with Serum Institute in Pune.
#
So that's at least one sixth where, by all accounts,
#
they've done reasonably well in their trials.
#
So there were 150 projects that began
#
on trying to build vaccines for SARS-CoV-2.
#
And every day, more projects are reaching the finish line
#
in terms of approvals, in terms of launches
#
of manufacturing capacity, and the price will come down.
#
So I would just like to say, at this point,
#
I don't think that there is a market failure.
#
Multiple people should negotiate.
#
I don't think it should only be the Indian state.
#
I would like the Amit Verma club of guests
#
to negotiate for 45 doses.
#
And we should meet up at Shivaji Park,
#
and we should get doses into Auvanaa.
#
Yeah, that's a realistic plan.
#
I'm actually going to try and get 45 doses and call my guests.
#
I've had many more than 45 guests,
#
but I think you've been on enough episodes that if we just
#
go by frequency, you'll qualify as one of the 45 people
#
to get whatever vaccine this is, seen unseen vaccine.
#
Let's quickly talk about the implications.
#
And I'll, again, quote from what you have written here.
#
And of course, I'll link all these pieces in the show notes.
#
And at one point, you write as one
#
of the possible implications of allowing private persons
#
and state governments to import vaccines.
#
His quote, the private sector will
#
surprise us with innovation in business models,
#
billing arrangements, et cetera.
#
Perhaps some firms will find it easier
#
to deliver the one dose J&J vaccine in difficult locations.
#
Perhaps telecom companies will call their vast subscriber
#
base and sell vaccination services.
#
Private firms know how to segment the users
#
into a large number of categories and devise strategies
#
This is what a union government, which is also one use case,
#
And it seems to me that this is what we really need,
#
because the science is sorted.
#
It's miraculous that we've come up
#
with so many vaccines which work in so many different ways.
#
And the science is sorted.
#
Where we are stuck is with the delivery mechanism,
#
that the vaccines aren't enough.
#
We need to do vaccinations.
#
And part of that is, of course, making people
#
agree to take the vaccines.
#
And there is a lot of vaccine skepticism still out there,
#
which just kind of baffles me.
#
But apart from that, the delivery
#
is one issue, where the state capacity has been
#
lacking in different ways.
#
And here, you are just allowing disruptors and innovators
#
to get into the space and innovate.
#
And this has a knockoff effect for the future,
#
because when we are hit with a pandemic again,
#
or we have any other kind of health care crisis,
#
or just in the normal course of how health care is delivered
#
in the country, there will be processes and ways
#
that will evolve out of this, which
#
are beyond the conception or imagination
#
of any central planner.
#
So even more than the current imperative
#
that, hey, we need to get as many people vaccinated
#
as possible, there are these knock-on effects.
#
So is this going to happen now that the government has said,
#
Is this sort of the great hope which will at least help
#
us avoid the third wave?
#
We're not yet there because of some problems.
#
One is the question of legal liabilities,
#
where foreign vendors are still nervous about coming
#
Second is about the risk of price controls coming
#
from the Indian government.
#
And this could include the judiciary.
#
I believe there is one case in the Kerala High Court,
#
one case in the Bombay High Court,
#
one case in the Supreme Court, where various private people
#
are telling a story about socialism
#
and the rights of every single Indian citizen
#
and demanding that the price control should
#
be either rupees 150 or 0.
#
And if these kinds of things come, then again, you've killed.
#
We are not yet there in terms of a world of private hunger
#
and innovation giving you a self-organizing system that
#
will figure out vaccine delivery in a way that no government can
#
But as you said, the essence of it
#
is can we bring the energy, the creativity, the innovation
#
of the Indian consumer goods companies into this?
#
Because they know how to reach users.
#
They know how to reach families.
#
They know how to touch the heartstrings of a mom.
#
They know how to segment consumers
#
into different, different regions
#
with different, different behaviors
#
and cultural characteristics.
#
That the vaccine jingle in Tamil Nadu
#
will be different from the vaccine jingle in Kerala.
#
Or within Kerala, how you talk to a Palakkad
#
Iyer will be different from how you talk to a Marthomite,
#
So that is what private people do.
#
They will think once it's a business,
#
there will be opportunities.
#
And they will find ways to deliver it,
#
which we can't think of.
#
So if somebody challenges us and says that, OK,
#
the union government tried this.
#
How would you do it differently?
#
My humble answer would be, I don't know.
#
I'm not better than the civil servants trying
#
to run a state-led system.
#
They tried to design a program.
#
And they've got some IT system.
#
They want to monopolize information.
#
And they want to run it.
#
I don't have improvements upon them
#
in figuring out how to run a state-led system backed
#
But the point is that that system has not worked well,
#
and in my humble opinion, cannot and will not work well,
#
because India is so diverse that any one union government
#
scheme, even if it is done optimally,
#
will hit a certain narrow target audience
#
and will not reach a large base of the population.
#
The Indian population is so diverse.
#
You need the genius of the Indian private sector
#
to segment, segment, segment, and differentiate,
#
and come up with different kinds of products,
#
and to surprise us in how this was done.
#
To give you a telecom analogy, all of us
#
remember how when mobile phones first came,
#
they were at 16 rupees a minute.
#
And they were a status symbol for the page three people.
#
And at the time, the Indian government
#
was running a village telephone scheme,
#
where they were trying to get one payphone into every village.
#
And by the time the consumer marketing people
#
were done with this, we had a billion phones in India.
#
And we have innovations like giving 25 rupees of a top-up
#
at every panwala in India and putting it into a phone.
#
This is something no central planner could have imagined
#
and had not happened anywhere else in the world.
#
This was just Indian grassroots innovation
#
where people close to the ground looked at their world
#
and figured out novel solutions.
#
And I feel this is what private people can do
#
I just want to underline how we should not
#
view the present vaccination problem as a one-off.
#
The first reason for this is that the SARS-CoV-2 virus is
#
And there are variants.
#
And there will be new variants in the future.
#
So far, the situation seems promising,
#
that generally, the vaccines as known today
#
fare well in the research papers against the variants
#
as seen today, barring one paper which
#
has some bad news on a vaccine developed against the Wuhan
#
variant and tested against a South African variant.
#
Generally, these old vaccines are faring well.
#
In particular, the B117, which is the most studied dangerous
#
variant, is reasonably blocked by Pfizer, Moderna, AstraZeneca.
#
So far, things are looking good.
#
But we should plan that the virus will fight back.
#
There will be new variants in the future.
#
So when the variants come in the future,
#
we will need booster doses.
#
And so again, establishing a large-scale distribution
#
strategy to get booster doses out in a hurry is required.
#
And that problem is harder than where we are today.
#
Today, a lot of India has got seroprevalence.
#
So by now, a lot of people in India
#
have got immunity through the disease
#
because we've been living in this nightmare for 13 months.
#
When a new variant comes through which requires a booster dose,
#
we'd much rather go through 13 weeks of rolling out
#
a booster all over India rather than going through a disease
#
experience all over again.
#
So this is a very important reason
#
why we must lay long-term institutional foundations
#
of a privately-led business where vaccines are going
#
all around India and we normalize vaccines
#
as part of our life so that as and when the variants come,
#
we are more ready for that.
#
I want to note in passing that if India is a COVID shield,
#
namely AstraZeneca vaccine monoculture,
#
then we are more fragile because a variant comes along
#
which is able to break through against that one vaccine.
#
And suddenly, the whole country is in trouble.
#
Whereas in the self-organizing system,
#
in a more privately-led system where
#
there are many different vaccines,
#
it's a more robust design.
#
The market economy always comes up with a more robust design.
#
It's not a monoculture.
#
It's a polyculture where there are many, many vaccines.
#
So any one variant will knock out some people
#
but will not bring the entire country down
#
on its knees at one time.
#
So this is one more important reason
#
to have a vaccine polyculture that would come inevitably
#
out of a privately-led model where there are many,
#
many private people shopping in the world market
#
for many different vaccines.
#
And we just allow that to proceed.
#
It will automatically generate many different vaccines.
#
The last point I would like to make on this
#
is in continuation of what I said a while ago.
#
Actually, for all of us in India,
#
we need to normalize vaccination
#
as a part of our everyday life
#
because there is a great array of wonderful adult vaccines
#
And there's just something that's gone wrong in our heads
#
ever since the smallpox program
#
that we tend to think the government does vaccination
#
or that infants do vaccination.
#
But we don't do vaccination.
#
I think we adults need to be doing far more vaccination.
#
Tell me a bit more about Justice's point.
#
What are the adult vaccines?
#
And what would you recommend to me
#
and all the adult listeners of this
#
that we should just go out and get now?
#
I'm not an expert on the science of it.
#
Here are two examples off the top of my head.
#
There is a flu vaccine which is refreshed every year
#
Vijay Khilkar's daughter, who has a PhD in the subject,
#
said to me that every time you go to America,
#
you should get a flu shot
#
because that gives you a refreshed flu vaccine every year.
#
And then for about a year, you're immune to the flu.
#
So that's one less thing to think about.
#
And the flu is a significant threat for all of us.
#
And it's good to rule that out.
#
I narrated another example, dengue is actually a disease
#
where there's a decent vaccine that is there in the world.
#
It's just not there in India for whatever reasons.
#
And again, if there is enough for private market,
#
maybe dengue vaccine import,
#
maybe even manufacturing at some point will come to India.
#
For all of us, there are four variants of dengue.
#
It is likely that most of us have not had dengue four times.
#
So we are vulnerable to one or more of those strains.
#
And it would just be fabulous to rule out dengue fever
#
as one more thing that you need to think about.
#
But the most exciting stuff is in the future.
#
The most exciting stuff
#
is the incredible improvements in vaccine science
#
that happened because of SARS-CoV-2.
#
So in the run for vaccines for SARS-CoV-2,
#
we have understood so much more
#
about the nature of pathogens and vaccines.
#
We may get a vaccine against many cancers
#
by going down the route of mRNA technology.
#
We may get a vaccine against HIV,
#
which has been a holy grail since the 80s.
#
And all in all, the giant effort to get a vaccine
#
against HIV has failed till today.
#
But now finally, with the mRNA technology,
#
there is new hope that an HIV vaccine might work out.
#
Just a few weeks ago, a large scale trial
#
for a malaria vaccine generated 77% effectiveness.
#
So there is actually fabulous stuff
#
that's going on with vaccines.
#
And there are at least five or 10 others
#
that I'm not able to rattle out right now,
#
because it's not my field,
#
but I have it on authority from people
#
whose scientific understanding is better than mine,
#
that there is a large area of adult vaccines
#
that are available both in India and abroad.
#
And somehow we in India had just shut our eyes to it,
#
partly because we are in this notion
#
that, oh, the government does everything.
#
So there's some weird concept
#
that vaccination is a responsibility of the government.
#
And the government, of course,
#
inadequately does a measly 25 million infants
#
and 30 million moms per year.
#
And for the rest, the government does nothing about adults.
#
and I think we the people need to break out of that.
#
And for that, the energy in a completely private,
#
where we view a vaccine as a public good
#
with an externality, maybe some voucherizing,
#
is a logical way to proceed.
#
Fabulous. Many strands in there.
#
In one sense, in the leaps in medical technology,
#
that COVID-19 sort of catalyzed,
#
some of it is mind-blowing, like the mRNA vaccine,
#
the fact that you had the genome sequenced
#
and the vaccine basically designed in a computer
#
as far back as January last year.
#
It's just mind-blowing.
#
On 16th of Jan or something,
#
a Chinese scientist uploaded the genetic sequence
#
for the Wuhan strain of SARS-CoV-2.
#
the software had been run inside Moderna
#
and they had the vaccine designed.
#
I mean, it's just incredible.
#
And aside, you were speaking of delivery.
#
And if you look at what the US did,
#
it's still straight run,
#
but you can go to a pharmacy and get it.
#
You can go to a Walmart and get it.
#
You can go to all these places and get it.
#
And like we can get a mobile recharge at a Panwala,
#
who knows where we could get the vaccine for cancer
#
whenever it's developed.
#
I mean, obviously there are questions of trust and all.
#
And the overall point that society can solve
#
its own problems most of the time
#
is something that I just agree with so overwhelmingly.
#
And being an 80s kid who then saw liberalization
#
and saw what it did and all of that,
#
you have examples of that which are so stark.
#
I mean, back in the 80s,
#
it took you five years to get a freaking phone
#
and look at how things are now.
#
I want to touch on, I think, one other major theme
#
and I want to go off on a little bit of a rant here
#
because I think most people just don't get it
#
and it's tragic, which is price controls.
#
we need to understand price controls a little bit better
#
because I think a fundamental mistake
#
many of us make when it comes to public policy
#
is we confuse intention for outcome.
#
And so many public policies are sort of judged
#
on the basis of their intentions
#
that, oh, the labor laws protect workers
#
and this law does this.
#
And I think one of the classic example of a law like that
#
that has really bad outcomes
#
but great intentions are price controls.
#
So a quick thought experiment for my listeners.
#
What if the government was to come and say tomorrow
#
that, listen, why should only the rich have cars?
#
Everybody should have cars.
#
And to enable that, we are putting a price control on cars.
#
Cars should be available only for a thousand rupees.
#
What do you think would happen?
#
Basically, what would happen is over a period of time
#
after the existing cars are gone,
#
there would be no cars because you cannot make a car
#
Similarly, let's say you set a more realistic tag
#
of five lakhs and say anything beyond that is luxury.
#
You would have a certain category of cars
#
which you can profitably sell for five lakhs
#
but you won't have luxury cars or SUVs or whatever
#
In each case, the price control would have led to a shortage
#
that happens with everything.
#
Now there are sort of two effects which price controls have.
#
One is the short-term effect of a shortage
#
and the other has to do with incentives.
#
I like to illustrate that by talking
#
about Uber search pricing.
#
So bear with me while I kind of quickly go through that.
#
Let's say that you hit the app and there are 100 drivers
#
and there are 100 customers who are on the app
#
at that particular point in time, simplistic example.
#
What will happen is that everybody gets a cab
#
Now let's say that there are 100 cabs and 300 customers.
#
If you don't have search pricing,
#
if it becomes a first come first serve
#
and then 100 people get their cabs
#
but 200 people are kind of left out in the cold.
#
Somebody may have to catch a flight urgently
#
in post-COVID times, of course.
#
Somebody may need to go to the hospital urgently
#
and they can't do that.
#
While some of the 100 who would have gotten that cab
#
in the first come first serve,
#
maybe they could have walked,
#
maybe they could have done something else.
#
It wasn't so urgent for them.
#
So you're allocating only on the basis
#
of who kind of got there first.
#
Now here's what search pricing does.
#
It ensures that the price accurately reflects
#
the demand of that particular thing.
#
So if I just want to go nearby in the neighborhood,
#
I might think, hey, I'll just take an auto
#
instead of paying so much or I'll just take a whatever.
#
But somebody who wants to go to the hospital,
#
wants to go to the airport,
#
actually has the option of doing that.
#
And the shortage isn't quite there
#
because the price keeps adjusting.
#
That's the immediate short-term impact of a price control
#
where price controls create shortages.
#
In fact, when Uber search pricing was banned in Delhi,
#
a friend of mine missed a flight
#
because he couldn't find an Uber to get to the airport.
#
So this kind of literally happened.
#
After the Chennai floods happened,
#
people were criticizing the airlines
#
for raising their prices and all of that.
#
But the bottom line is that what would have happened
#
if they didn't raise their prices?
#
First come first serve and a bunch of people
#
This is only the immediate impact, shortages.
#
There is a deeper long-term impact,
#
which is more problematic.
#
What happens when a price goes up?
#
A price carries information.
#
When a price goes up, like in Uber,
#
there might be drivers who are sitting inactive
#
who might say, hey, I can have my lunch later.
#
Let me make some money now.
#
And they go out and they serve the need of the person
#
The supply goes up when you allow the price
#
to express what the demand actually is.
#
And we saw this play out earlier
#
when the government put a price control on strengths.
#
And the moment that came out,
#
I remember tweeting that we know where this is gonna go.
#
There will be shortages and there were shortages.
#
And those shortages necessarily
#
would have cost a life somewhere or the other
#
because someone who needed a stent couldn't get one.
#
there is the unseen effect of that information
#
of the rising price not going out,
#
the information being that,
#
hey, people need this, make it, somebody make it.
#
That information simply doesn't go out there.
#
And this is another reason why I think price controls
#
when it comes to vaccines would be incredibly dangerous,
#
especially in a competitive marketplace,
#
like you pointed out, there are sort of so many competitors.
#
So one, do you have anything to add to this,
#
something that I might have missed
#
or a nuance that you'd like to add?
#
And two, why is this mindset still so pervasive
#
and almost reflexive among policymakers
#
where you always want to signal your intention
#
and you don't give a damn about what the outcome might be?
#
So I want to add two things to this.
#
The first is that holding other things constant,
#
we read that serum faces constraints
#
because of shortages of some particular components, okay?
#
And it is obvious that paying more money would help.
#
If serum got a higher price for the vaccine,
#
they would be willing to pay a higher price
#
They would go somewhere on the world market,
#
buy that component, ration out some other buyer
#
And in the short term, there would be a supply response
#
as a consequence of a higher price.
#
So that's the first point
#
that high prices will have a small impact
#
even in the short term.
#
It's not as if assembly lines are fixed.
#
So my experience with corporations
#
and my observation of corporations
#
is that there are actually many, many fudge factors
#
that a corporation can use to change supply.
#
You go up from one shift to two shifts,
#
you go up from two shifts to three shifts,
#
you bump up the capacity utilization,
#
you squeeze every last bit of output of the machines.
#
So the machines are not as fixed as meets the eye.
#
It's not like a hospital bed
#
which can only do one person at a time.
#
My second comment is that I think all of us
#
tend to see serum as being here,
#
making the Covishield vaccine out of thin air for free.
#
What I feel they're not giving enough credit for
#
is a wide array of risk-taking that took place ahead of time,
#
out of which this is one of the few people
#
Many, many people took risks in the early stages of this,
#
and I want to tell a story about SARS-CoV-1.
#
So when SARS-CoV-1 came,
#
it was seen as a very dangerous disease.
#
The infection fatality rate for SARS-CoV-1 is higher
#
than the infection fatality rate for SARS-CoV-2.
#
So there was a whole energy of people
#
who started studying SARS-CoV-1 and thinking,
#
I'm gonna make a vaccine for this.
#
So there was money that went into research
#
into starting to build the manufacturing facilities
#
And now it so happened that,
#
in the case of SARS-CoV-1, the public health delivered.
#
The public health managed to do the trace test isolate,
#
and the epidemic went away.
#
So in effect, there was no market for drugs or vaccines
#
All the people who put money into SARS-CoV-1
#
ended up getting nothing out of it,
#
whether they were philanthropists
#
or they were private people.
#
So there were private people,
#
there were venture capitalists,
#
there were philanthropists,
#
there was a whole machinery that was flung to SARS-CoV-1,
#
which in the event proved to be irrelevant, okay?
#
So first, there were people who had,
#
who were bearing the scars of the sadness
#
that had happened after SARS-CoV-1,
#
who were saying, you know what,
#
are you sure we wanna do this?
#
Because we saw how badly that one worked out, okay?
#
And then many people decided that,
#
okay, let's take the risk.
#
Let's go build a research project,
#
a manufacturing project to build a cure,
#
to build a vaccine, okay?
#
More than 150 projects took off to try to build a vaccine.
#
All of them committed money into it.
#
Many, many manufacturing facilities were built.
#
There are some seven different pathways to make a vaccine
#
and many people thought that pathway number six
#
and I'm gonna preemptively build a factory
#
in the belief that somebody is gonna get a vaccine
#
on pathway number six and then they'll come to me
#
and ask me for the manufacturing.
#
Many of these people have lost money along the way.
#
It just happens to be that Serum Institute,
#
AstraZeneca is one combination
#
which came out right at the end.
#
We should not understate the risk that they took
#
and in return for those risks,
#
they need a fair return on their capital.
#
And if we, as a society,
#
are churlish about them earning that return,
#
this will have two consequences.
#
The first is that firms like Serum will think
#
that it's not wise to have exposure
#
to the Indian legal political system
#
and they will organize themselves
#
as a London domiciled company.
#
And the second is that in the future,
#
private firms will be even more careful
#
and even more circumspect before building things
#
that will be useful to the people of India.
#
Words that we should pay attention to,
#
but the point is the people who kind of make
#
all the decisions regarding these things
#
are politicians who find it more in their interest
#
to signal virtue than actually reach meaningful outcomes.
#
And you never know the counterfactual,
#
so it's not as if you can look at a specific outcome.
#
So I think that one thing has changed.
#
Late 2020, I felt that the debate was just pure ideology.
#
I would just hit brick walls where people would say,
#
oh, how can there be a price for a vaccine?
#
Or, oh, how can you have private people doing a vaccine?
#
Or, oh, how can you have vaccine imports?
#
Okay, these were just ideological brick walls.
#
I think the most powerful thing that has changed today
#
is one objective metric.
#
The New York Times cross-country comparison
#
where India is at rank 62.
#
I think that's a powerful force of accountability.
#
So if we had comparable global comparisons,
#
good quality global comparisons on COVID-19,
#
maybe things would have been different.
#
But in the case of vaccination, we have a metric.
#
We are able to look how India is faring
#
compared to other countries.
#
And I think that generates a good feedback loop
#
that when policymakers will do the right things,
#
India's rank in that will improve and vice versa.
#
We are recording this on April 29th.
#
Sitting here in the thick of things,
#
we're not as much in the fog of war
#
as we were last year this time.
#
We know a lot more, and yet, right now,
#
we are in the middle of this crazy crisis
#
that is happening in our country.
#
Which is like nothing I have seen in my lifetime, frankly.
#
Like how do you look at this?
#
We are in the middle of great trauma and great pain,
#
both collectively and very often individually.
#
But at the same time, you said you're a natural optimist.
#
So what are the things that kind of make you optimistic?
#
Like in one sense, of course, there is a way
#
that science is progressing by leaps and bounds,
#
and that should give us hope for sure.
#
But what gives you hope and what gives you despair
#
about whatever you have learned from this current crisis
#
and how things are evolving?
#
Hearing about friends and the nightmare of COVID-19
#
is just profoundly challenging.
#
We're running out of tears.
#
It is so difficult to deal with that.
#
So that's the everyday nightmare that we face.
#
In terms of how this plays out,
#
I have one important disagreement with many
#
international comparisons, most notably by the economists.
#
So economists and finance people are tending
#
to measure normalcy in a country by the vaccination rate.
#
And I think that is incorrect because past experience
#
with the disease also immunizes a person
#
until they get to genuinely new variants.
#
And my opinion is that by and large in India today,
#
we are in decent shape, that the variants that are
#
in the fray are generally not breaking through
#
into people who have had the disease once before.
#
So the true rate at which India is changing
#
the disease dynamics is the combination of vaccination
#
and disease experience.
#
And that gives me a lot of hope.
#
Then if we manage to address these dangers
#
of price controls, and if we get private people thinking
#
that instead of spending 45,000 rupees
#
to buy an oxygen cylinder, I should spend 4,500 rupees
#
to buy vaccination services,
#
then that would be pretty transformative.
#
Because if 100 million people will go get vaccinated,
#
it would do a lot of good in terms
#
of changing the disease dynamics.
#
The vaccine shortage is less dangerous than meets the eye
#
because for people who've had the disease once,
#
you only need one dose.
#
So you don't need to multiply large numbers
#
of Indian people vaccinated multiplied by two
#
to get to the desired objective.
#
You can make do with a lower number of vaccine doses.
#
And my last piece of optimism is
#
that the vaccine supply situation
#
is getting better quite dramatically.
#
Every day, the manufacturing side
#
of the global vaccines business is learning
#
to tweak their processes and get up to higher output.
#
And every day, more vaccine candidates
#
are finishing their trials
#
and generally the results are pretty good.
#
By and large, many approaches that mankind has taken
#
to find a vaccine have proved to be successful.
#
So as the days and weeks and months go by,
#
in my opinion, vaccine availability
#
will improve significantly.
#
We've just got to solve the barrier in our heads
#
about paying market prices.
#
So when we buy a mobile phone,
#
we basically look at competing choices
#
from all over the world.
#
And then we don't whine that I'm not willing
#
to pay 10,000 rupees for a mobile phone.
#
We say that's a market discovered price.
#
It achieves legitimacy because it was discovered
#
on a competitive market.
#
I think the most important point about today
#
is that we are already there.
#
There are five rival vendors who are ready
#
to sit across the table and negotiate with you.
#
As long as you give them
#
the correct legal liability protections.
#
They can discuss, maybe their factories
#
are booked out till June, then maybe in July,
#
they'll be able to say,
#
I can give you 1 million doses in July or whatever.
#
It's a business and we in India need to get
#
into that arena and start playing
#
where various Indian persons are trying to buy vaccines.
#
And I want to add to that and also before that,
#
sort of come up with a clarification,
#
which is that when you said that people
#
who got the disease earlier or are getting vaccinated
#
now are protected against these variants.
#
That is very much true in the sense that it doesn't mean
#
that they won't get COVID-19 again.
#
They might get COVID-19 again,
#
but the severity will be much less.
#
And I think by now there is enough credible data
#
that I have seen out there saying that both Covishield
#
and Covaxin prevent the disease from getting severe
#
if you do happen to catch it after you get vaccinated.
#
So please go out and get vaccinated.
#
The other sort of point I'd like to add,
#
which is something you have also made in your articles
#
is that people will complain that,
#
okay, if you allow it to be sold on the private market
#
and it'll create inequalities,
#
those with money will get it and so on.
#
Two points I'd like to make there.
#
One of course is that it is not either
#
or the government should on a war footing
#
just vaccinate everyone for free as much as they can.
#
let private parties do what they do.
#
The other point is let us say that from the private party,
#
a rich guy who can afford whatever it costs
#
is going out and getting vaccinated.
#
He's not the only one who's benefiting.
#
Everybody is benefiting.
#
This is the kind of thing where society benefits
#
when any individual gets vaccinated
#
because of those around him.
#
And when these people who buy their vaccinations,
#
not only are others around them benefiting,
#
they also feel confident to go out in the world
#
and get about their business and the economy also benefits.
#
And again, that has positive externalities
#
and others benefit as well.
#
So we've got to kind of think about
#
all these angles as well.
#
And the government should do vouchers.
#
Right, and by vouchers,
#
what you essentially mean is that you get vouchers,
#
you can spend it on whatever vaccine you want.
#
Correct, so private people would get a voucher
#
of say a thousand rupees for a dose
#
and the private person would go to a private producer
#
of their choice and pay something.
#
It doesn't matter what,
#
it could be 25,000 or 2,000.
#
And out of the 2,000 that has to be paid,
#
1,000 would be paid in cash,
#
1,000 would be paid as a voucher
#
and the private vendor would get a reimbursement
#
of a thousand rupees from the government.
#
So this is the way to get vaccination out on scale
#
The government doesn't need to produce schools.
#
The government needs to give vouchers
#
and then parents will use the vouchers
#
and buy schooling services.
#
In the same fashion, parents will use those vouchers
#
and buy vaccination services.
#
So the objective is you have either of equity
#
or of emphasizing certain subsets of the population
#
such as school teachers or of emphasizing some regions
#
where the epidemic is particularly bad.
#
If you feel there are some political compulsions,
#
then you should cater to them through vouchers
#
rather than saying that I will do the whole thing
#
because the government machinery tried its best.
#
I respect the constraints of the operating environment
#
for the officials and they delivered rank 62 in the world.
#
So let's have no high hopes for what a government can do.
#
Yeah, I couldn't agree with you more.
#
And once again, I am not someone
#
who ever advocates government spending.
#
I'm against most government spending,
#
but in this case, we are at war.
#
And for me, there are really no limits.
#
This is a question of spending billions
#
to save trillions down the line,
#
which of course is unseen, but we have to kind of do it.
#
Ajay, thanks so much for giving me so much of your time today
#
and sharing your insights.
#
My pleasure to be here.
#
If you enjoyed listening to this episode,
#
check out the show notes.
#
I have linked all my past episodes on COVID
#
as well as many of the insightful pieces
#
that Ajay and others have written
#
about this problem of vaccines.
#
You can follow Ajay on Twitter at Ajay underscore Shah.
#
You can follow me at Amit Verma, A-M-I-T-V-A-R-M-A.
#
You can browse past episodes of The Scene and the Unseen
#
Thank you for listening
#
and take care of yourself and your loved ones.
#
Did you enjoy this episode of The Scene and the Unseen?
#
If so, would you like to support the production of the show?
#
You can go over to sceneunseen.in slash support
#
and contribute any amount you like
#
to keep this podcast alive and kicking.
