In a recent post Mark Thoma quotes Jeff Sachs and several other commentators on the issue of providing antimalarial bednets free of charge in
First, when you are heavily subsidizing something you are missing a big part of the problem if you obsess on the issue of whether the subsidy is for 95% of the cost or 100%. I don’t for a minute want to belittle the importance of that 5% to a very poor person but it is very very important not to lose sight of a fundamental fact: Either way, we are NOT talking about anything like a “market”. We are of necessity talking about administratively providing (either through the government or an aid organization) bednets and medicines in a transaction where the profit incentive is nowhere to be found for anyone. That isn’t like any actual market transaction I know of. It is a grant and the issue of a token payment revolves around issues of psychology for the recipient and not on any kind of market.
Second, there is a long history in
I am not arguing against the humanitarian need to help those in malarial areas. What I am saying is that we should, if we can, do it in a way that will not depend on a never ending stream of aid from rich countries to maintain success because if there is one thing we know from history it is that aid is NEVER infinite. There is always a new humanitarian disaster or fad in development giving to switch to. That means that giving stuff for free is great if you are on a campaign where a realistically attainable goal is the complete eradication of the disease involved so that the aid is never needed again. If that is not the case, or if there is a more development friendly way to do it, then the issue gets a bit more complicated.
What would a REAL market based solution look like? Well, for one thing, a sustainable market in bednets in
This approach might be a bit slower but it would also have the benefit of lasting longer. Jeff Sachs is right to be appalled that we are not doing more. But the best long run solution may not hinge on the question of whether the subsidy should be 95% vs. 100%.