The Joe Walker Podcast - The Race That Stopped The Nation — Richard Holden & Steven Hamilton

Episode Date: August 30, 2021

Richard Holden is Professor of Economics at UNSW. Steven Hamilton is an Assistant Professor of Economics at The George Washington University. Full transcript available at: josephnoelwalker.com/holden-hamiltonSee omnystudio.com/listener for privacy information.

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you. To discover the world of Blinkist and shortcasts, head to Blinkist.com slash Swagman. Right now, they have a special offer just for JSP listeners. You can get 25% off an annual subscription and try Blinkist premium free for seven days. That's Blinkist spelled B-L-I-N-K-I-S-T dot com slash Swagman. You're listening to the Jolly Swagman Podcast. Here's your host, Joe Walker. Ladies and gentlemen, boys and girls, Swagman and and swagettes, welcome back to the show. It's great to have you back. Before I introduce the episode, three quick items of housekeeping. Firstly, as many of you now know, every weekend I send out an email with a bunch of links to things I find interesting.

Last weekend, for example, I sent out five links. They were Cicero's speech in favor of the Lex Manilia, delivered in 66 BC, his first ever public address to the Assembly of the Roman People, an article about managing uncertainty and profits in the film industry, including a chart showing the percentage of major film studios, production budgets, and profits accounted for by sequels since the late 80s, a relatively obscure podcast interview with an Australian host that I found and thought was excellent. The guest was David Deutsch

and the conversation was about Karl Popper. A recent review article by Brian Arthur on the foundations of complexity economics and the poem Two Passivists by Danish polymath and physicist Pete Hine. I send out this email every weekend. There are always, of course, different links. No spam. It's not even particularly curated. I don't, for example, put in one quote, one video,

one essay. Sometimes it can be very unbalanced. It's purely things I find interesting and want to share. So if you want to sign up, head to thejspod.com. Second item, a shout out to my mate Misha Zielinski, who runs a podcast called Diplomates. If you're an Aussie interested in policy, politics, foreign affairs, geopolitics, I recommend checking it out. Misha has an easy conversational style and some great guests. Thirdly and finally, the transcript for this episode will be available on my website, thejspod.com. I'll be putting transcripts up more regularly because people have been asking for them. I haven't been very good at being consistent about this.

Also, if you want handpicked transcripts from my show and other shows, you can also now subscribe to the new magazine I'm involved in. Go to podread.org to check it out. This is an episode about the race that stopped the nation. Sadly, I'm not talking about the Melbourne Cup, Australia's most famous annual horse race. I'm talking about our vaccine rollout.

The rollout began in late February. Initially, the federal government said that all Australians would be fully vaccinated by October, but it delayed and then scrapped that timeline. 180 days into the rollout, 42% of all Australians had received at least one jab, compared with 61% in the United Kingdom, 65% in Canada, and the OECD median of 50%. By the end of June, with fewer than 5% of its population fully vaccinated, Australia was ranked dead last in the OECD. As of the 27th of August, according to Our World in Data, we were fourth last. 66.1% of Canadians are fully vaccinated, 62.1% of Brits, 59.6% of Germans, and 51.3% of Americans, compared with 26.2% of Australians. Australia bungled its vaccine rollout due to a

series of epic missteps on the part of our governments. On the 10th of March 2020, Brendan Murphy, then Chief Medical Officer of Australia, said when asked when Australia would get to 1 million doses administered, quote, This is not a race. We have no burning platform in Australia. We are taking it as quickly and carefully and safely as we can. We're not like the US or the UK or most other countries in the world where they've got people in hospital dying.

We can take our time, set up systems, do it safely and carefully. We are expanding our rollout every day. End quote. The slogan took off the next day. Scott Morrison, Australia's Prime Minister, repeated the it's not a race mantra in three different interviews. We were told the vaccine rollout was not a race, but it always was. And now, with Australia's two most populous states, New South Wales and Victoria, and the Australian Capital Territory in lockdown, and New South Wales just posting a new daily record for case numbers and the largest number ever recorded by an

Australian jurisdiction in a 24-hour period, we are feasting on the consequences. The good news is that we're now vaccinating incredibly quickly. In New South Wales, the vaccination rate is among the fastest, if not now the fastest in the world, but that doesn't undo the damage already done. To discuss why this was always a race and how we lost it, I'm joined by two economists, both former guests of the podcast. Richard Holden is Professor of Economics at the University of New South Wales and President-elect of the Academy of Social Sciences in Australia. Prior to that, he was on the faculty at Chicago and MIT. Stephen Hamilton is an Assistant Professor of economics at the George Washington University

and a visiting fellow of the Tax and Transfer Policy Institute at ANU. Steve is a former economist at the Australian Treasury. Both Steve and Richard have co-authored a plethora of articles in Australian newspapers this year on Australia's vaccine rollout. On the 1st of February, for example, they wrote in the Sydney Morning Herald that our vaccine strategy needed an urgent rethink. On the 5th of April, in the same masthead, they wrote about how the rollout was an unmitigated disaster and how to fix it. If ever there was an example of Donald Horne's jibe that we are a lucky country run by second

rate people, sadly the rollout is it. It is the biggest logistical exercise in recent Australian history and it now surely ranks as the greatest public policy disaster. Such a blunder feels like it deserves a podcast. I hope you enjoy the conversation. Richard Holden, Steve Hamilton, welcome back to the Jolly Swagman podcast. Great to be here, Joe. G'day, Joe. Great to see you both again. Richard and Steve, I know you guys, but could you each just give a brief introduction of yourself

so that people listening along at home can attach a voice to a name? Richard, could you go first? No worries. So I'm Richard Holden. I'm a professor of economics at UNSW Business School. And I am, as you might have guessed, an economist. And Steve? Yeah, I'm an assistant professor of economics at the George Washington University in Washington, DC. And I've been in Australia since the start of the pandemic, kind of hiding out. But we're going to talk about vaccines. And it's kind of time for me to go back,

right, given the way that the two rollouts have gone. I'm actually still unvaccinated. I'm not anti-vax. I'm just in an area where the supply is not available to my age group. Okay. So we're doing this by Skype, sadly not in person. And that's because of the race that stopped the nation. And that's also, as you alluded to, Steve, the topic of this conversation and i'd love to with both of

you because you've been very early and very vocal on this issue forensically examine what went wrong in australia's handling of the pandemic especially the vaccine rollout but first i'd like to start by summarizing what went well last year because if you can remember back this far in early December 2020 domestic and international media were writing articles with headlines like how Australia beat COVID-19. So let's set the scene and the context for folks listening by talking about what we did well in the beginning stages of the pandemic and why it was important to do the things that we did. Richard, I'll start with you. Thanks, Joe. And let me just start by pointing out that this is my third time on the pod and

only Steve's second time on the pod. So I just want to get that on the record. That's the real race. So what happened in March last year? Well, at a time when we'd had three deaths and about 80 odd cases in Australia, there was this question of what we're going to do with the international border. And I wrote a piece in the Financial Review in the first week of March that said, shut it down now. This is basically nuts that we have a quarter of Italy in lockdown, but we have Italian nationals coming into Australia and we might take their phone number or a dodgy Gmail address from them, but there was no quarantine, there was no health checks, no nothing.

Scott Morrison at that time was telling people he was planning to go to the footy that weekend. And I think the right reading of things is that Gladys Berejiklian and Dan Andrews put their foot down and pretty soon after that, you know, we sealed our international border. And then we got contact tracing and testing really stood up and up to speed from a situation where we had effectively no testing and no contact tracing of COVID-19. And we had, once cases got bigger, a lockdown that gave us the ability to get those things up and running. And then we were in a much better place to deal with

the pandemic with much more minimal restrictions than we saw overseas, precisely because we didn't let it get out of control early on. Yeah, I mean, I would agree. And in fact, Richard and I have been on a unity ticket, I think for around 18 months on this question. I'm waiting for the thing that we violently disagree about, but who knows what that will be. But the, yeah, I was in mid-March 2020. I was in Washington. And so my head actually wasn't, I wasn't thinking about Australia at all at that point. I was thinking about the US.

And I guess I was one of the first people in mid-March to really loudly, you know, call out this notion that the whole economy was about to switch off, right, for several, at that point, I think I said six to eight weeks, which now seems hilariously naive. And I was kind of, and I've talked to you about this before, Joe, you know, I was on with Chris Edmund last year, you know, the need for economic supports, and in particular, in my case, advocating for small business support, right, to help businesses through where stimulus wouldn't normally get through to them because we've kind of frozen the economy.

So I talked a lot about that around this time. But in mid-March, you know, my wife was laid off. She's a pastry chef. My daughter, her school was closed. And I'm a professor and my university was closed. So we're all sitting there in D.C. thinking, what the hell are we going to do? So we all just got on a plane and came university was closed. So we're all sitting there in DC thinking, what the hell are we going to do? So we all just got on a plane and came back to Australia. And I think we were on maybe the last flight into the country before they closed the border. And then when I came back,

I started thinking about Australian policy. And early on, Richard, so there were four of us, economists, Richard, myself, Bruce Preston, and Chris Edmund at the University of Melbourne, who kind of banded together and had a similar view in early to mid last year that we needed very aggressive lockdowns to halt the spread of the virus, paired with very generous fiscal supports for businesses and individuals, in order to bring cases down under control. And then, as Richard noted in his response, to put in place all of the public health measures that would allow us to be a little bit more subtle, a little bit more sophisticated in how we manage the virus. And so I agree with Richard entirely. I think we actually did a brilliant job of that. Different states have done differently, right? I'm in Queensland at the moment, and I'm not super happy with the way my state has managed the pandemic, notwithstanding the fact that it's had an outstanding performance in cases and deaths. But I think if you look around the world, there's no doubt at all that

Australia has performed incredibly well right up until the vaccine rollout. And I think for me, you know, the fact that the US never took the lesson from Italy, right? Like the US looked at Europe and thought, oh, well, that'll never be us. And Australia didn't make that mistake, right? Australia was probably a few weeks behind the US, but what we did that the US didn't is we took those lessons, right? And we didn't make the same mistake.

And so I look at Australia very positively. And I was just angry on Twitter yesterday at an American journalist saying, oh, you know, Australia and all its restrictions when, you know, more than 600,000 Americans are dead and fewer than 1,000 Australians are dead, right? So all you have to look at is the outcome to see how well we've managed the pandemic. You made an important point earlier, Steve, which is that the response to the pandemic needs to be part of a bundle. People seem to like to criticize particular aspects of the response in a vacuum, like lockdowns cause economic damage. But the argument from folks like yourself and

richard without putting words in your mouth but i think i understand your positions fairly well last year was that you know if we lock down hard and early we also need to be ramping up testing so we have like a sustainable exit strategy among other things and at the same time supporting individuals and businesses and coupling that support with the lockdowns yes i mean i look as as critical as richard and i have been of the vaccine rollout which we'll surely get into detail on um it's a we can't underestimate just how complex this problem is i mean it's incredibly's incredibly complex. It's unprecedented. As much as we should have seen it coming, you know, you can't expect the government to have full vision across all of

the possible facets of this thing and how to solve every single problem. So it's an incredible logistical task. And under the circumstances, certainly through 2020, it was pretty remarkable. And I've been very, very positive about our economic response, because I think our economic response, while not perfect, is pretty stunning. And I think, again, look at the outcomes, look at the way the labour market responded in the early part of this year to see how that aspect went. And again, the contact tracing, particularly in New South Wales and Victoria is outstanding. Even hotel quarantine, as again, as much as we've criticized hotel quarantine, it's held up pretty well in a lot of respects. So yes, it's a very

complex problem. And as you said, it requires 15 different solutions to 15 different kind of problems. And on that basis, overall, I think, you know, you cannot complain about the response, I would say. So I remember in the early stages of the pandemic, people were speculating that it could be as much as four or five years until we had effective vaccines. And yet famously, the mRNA vaccines were designed within like a couple of days of scientists receiving the virus's genetic code. And then around the world, by the end of 2020, vaccines started to be rolled out. A real triumph of human achievement, like so much so that it's caused folks like Tyler Cowen to say that it might be like a turning point in the West emerging from the so-called great stagnation, but a real triumph of the human species.

Vaccines, I'd love to just start on a rather elementary kind of note and discuss why it's important to vaccinate the population and how that should be done, what percent of the population needs to be vaccinated, how we come to that calculation. So just some basics around vaccination. Richard? Sure, no problem. how we come to that calculation. So just some basics around like vaccination, Richard. Sure, no problem. So there's basically, well, let me start by saying, I think you're exactly right, that the level of innovation and the value of innovation that's happened with vaccines against COVID-19 is kind of extraordinary.

And if, you know, you sort of want to look at what things in the last 100 years have saved a lot of lives, these vaccines are going to be in the top 10 of that list. They're just right up there. So they're pretty incredible. So why is it important to vaccinate? Well, basically, when a virus starts spreading around and is going to infect a lot of people, there's two ways you can become immune to it, you can either get vaccinated, or you can get the virus. So once something is going to circulate, once it's hard not to get it, once it's very contagious, then more or less the whole population is going to have to become immune one way or the other, there's the bad way, which is you get the virus, it's going to lead to a whole lot of people

getting very sick, a whole lot of people dying for a virus like the one we're facing and have been facing last year in this, or a vaccine can give them immunity against it. And obviously it's preferable if one can manage it to be vaccinated rather than go down the path of so-called herd immunity. So there's been a lot said about herd immunity. That's really the level at which sort of has two connotations. One is the sort of popular view, which is the idea of letting it rip, like some people said early on in the pandemic last year, let's let it rip and become immune through herd immunity. So what's that? That's when enough people have either had the virus or vaccinated against it, that an exponential outbreak can't occur anymore. There's basically just not enough new people for the virus to infect

that you can get an exponential spread. So if we're going to get there through vaccination, how many of us need to be vaccinated in order to get herd immunity? Well, that depends on two things. Depends on the efficacy of the vaccine, or in the real world that term is sometimes called the effectiveness of the vaccine, how good it is at stopping you getting the disease. And the second thing it depends on is the basic reproduction rate of the virus, so how contagious it is. There's a very simple formula for that that depends on those two things, but it goes exactly the way you'd expect. The more contagious the virus is, the higher the basic reproduction rate, the more people have to get vaccinated

to reach herd immunity. The higher the efficacy or the more effective the vaccine is, the lower the percentage of the population that need to be vaccinated. So when we're facing the original virus, which had a basic reproduction rate of about two and a half, and we had these vaccines like Pfizer and Moderna that had in the neighbourhood of a 95% efficacy, say from the phase three clinical trials, the proportion of the population we needed to get vaccinated

was somewhere in around the 60% of the population. Now, when you're dealing with vaccines with lower efficacy, that number goes up. But perhaps most importantly, what we're facing now is a basic reproduction rate for the Delta variant that people think is between five and maybe seven or maybe even higher. And once you're at that point, even with these vaccines like Pfizer and Moderna, really need a lot of the population vaccinated, north of 84% of the population to be vaccinated. So one of the great concerns has been whether we can actually get to herd immunity. No one in this country, and I certainly am not for it, is going to pin people down and shove needles in their arms. The question is, and I'm sure we'll

get to this, is what kind of incentives and nudges and other measures we're going to, what sort of suite of carrots and sticks we're going to have to encourage people to get vaccinated. And I think that's really the question that's before us at the moment. How do you think about the emergence of mutant variants and the prospect of rolling revaccinations, dragging on indefinitely? I think you pointed out that the original mRNA vaccines were developed basically in a weekend. So that's one thing that goes fantastically in our favour, which is if there is a variant that the current vaccines would not protect us against, there's a very real prospect of companies like Pfizer and Moderna being able to create a new vaccine very

quickly that will provide protection against that. Now, there's the important question of what kind of trials is that new vaccine going to need to go through? Are they going to be able to piggyback off the existing trials or are we going to have to wait for phase three clinical trials for that? That's really what the timeline was, as you pointed out last year, the sort of nine month or six to nine month timeline. So there's that question. I think the other thing that comes up with this is the question of, you know, booster shots. And so one of the things we know from evidence in the UK and in Israel is that these vaccines and vaccines like AstraZeneca and Pfizer may have differing sort

of rates of decay, if you like, but there's the question of how long your immunity lasts for and at what level. And I think, you know, I don't know what Steve's reading of the evidence is. I think my reading of the evidence is that we're probably going to be in a world where we need annual booster shots. So if you've had your two shots of Pfizer as of, say, September this year, I think, you know, think about August or September of next year as going in for another booster shot. And that will be the case even if it isn't a booster shot to deal with a new variant, even it's just to sort of soup up your immunity. Now, we deal with this all the time. We do this with tetanus every, say, 10 years or so. Or, you know when

you do something like mine are more frequent because i usually you know step on a rusty nail more than once every 10 years i have to go and go and get another one um so we're used to doing this we're not used to doing an annual basis but we are for the flu shot and so i think it's just going to become like the flu shot we'll just go get a shot every year sometimes they'll be updated sometimes they won't yeah so uh joe do you mind if i just jump in there please so the you know let me say two things one it's very early right there's so much uncertainty as to what works and what doesn't work with the vaccine so you know and richard and i if you read our pieces we've written i think 11 or 12 pieces since January, you know, have updated our priors when new data has become available, right? So we don't have perfect clarity about exactly how

these vaccines work in terms of their performance, whether they wane or don't wane, you know, what the effectiveness of boosters is, you know, all of this stuff is still quite uncertain. So, you know, we are in a world where we are, when we think about policy advice, we do need to think under uncertainty, right? So, so for example, you know, there's some data emerging, as Richard alluded to, that, you know, perhaps while AstraZeneca starts off at a lower efficacy than the mRNA vaccines, that efficacy may have more resilience, right? But because it's so new, we just don't know yet, right? We've only reached the point where they're roughly the same efficacy after six months, but like how they'll be beyond that is unknown, right? And we don't know whether

these vaccines can provide what they call sterilizing immunity, that is permanent, you know for it like the chicken box or something like just permanent immunity forever like there is no no virus uh in your system so all of this is still quite uncertain so when we're designing policy we need to think about you know boosters for example we don't know if that's going to be the end of it but we do know we do see some waning right and we do we do see new variants emerging. So it makes sense to get ahead of that curve, right? And start, and as you see, the US has begun to do this, right?

Which is move to the boosters just in case, right? Even if we didn't have waning immunity, do it just in case, right? And I think more of that thinking about providing the vaccine, even if it may not be necessary, because you're trying to cut off those really bad long tail risks, I think is the right way to think about this. The second thing I would say, just sort of adding to what Richard said before, is there's really two parts to the

vaccine. One is dealing with infection, right? So preventing infection and preventing transmission of the virus. But then the second part is minimizing the thing we really care about, which is death and maybe severe hospitalization and death, perhaps severe illness, right? So at the end of the day, you know, if everyone got COVID, but no one got severely ill or died, we wouldn't care about COVID, right? We just wouldn't talk about it. we wouldn't care about COVID, right? We just wouldn't talk about it. It wouldn't be a thing, right? The reason we care about it so much is because millions of people have been killed, right?

So we only want to minimize spread, minimize transmission, minimize infection because we're trying to minimize the end result, which is severe illness or death. So if, let's just say hypothetically, if the vaccines were 100% effective against severe illness and death, but they still allowed significant transmission, we wouldn't care so much, right? Because ultimately they're successful in saving people. And in a world where we do seem to be getting increasingly infectious variants, where herd immunity is increasingly far out of our reach. You know, a lot of commentators, including, you know, us, have focused a little bit more on illness and death than on transmission because, you know,

that's the last sort of beachhead, if you will, right? It's the last line of defense. So we need to be focusing on both. And as you can see, our national plan put forward by the prime minister makes that point, right? Once vaccination is very widespread, we won't focus so much on case numbers. We'll focus a lot more on the things we ultimately care about, which is, you know, severe illness and death. Steve, if you know the answer to this, and I certainly don't in any detail, and Richard, feel free to help us, but could you step us through the process of a trial for a vaccine designed by a biotech or a pharmaceutical company

or a university being satisfactorily completed, and then that vaccine ending up in someone's arm? Like, what are all the steps that happen through that process from government regulators approving the vaccine to governments procuring it and distributing it? Do you have like a sense, could you give us an overview of that process? Yeah, look, so I want to be a bit careful. So first thing I want to say, and I don't want to speak for Richard, but, you know, Richard and I are more or less the same category of people. You know, we're not public health experts, right? In the sense of, you know, being doctors or immunologists or, you know, we aren't, right? We're economists. But so much of the vaccine process, right, from the thing you're describing, right, from the very inception to achieving some kind of broad coverage is actually an economic problem rather than a medical one, right? that you described and some that you didn't are really about other things like, you know,

investment decisions, right? How to build the factories and scale and distribution channels, how to provide incentives, how to, again, procure vaccines, right? How to think about this as an insurance problem rather than a kind of medical one. So actually i mean there i'm sure there will be medical people listening to this who will be like what the hell do these two bloody economists know about this but it's very important to understand actually significantly this is an economic problem and and and frankly in my opinion uh one of the reasons why the process hasn't gone as well as it could have is because they haven't engaged people like us to help them with designing that process properly so i'll just pick up on a couple of parts of the process without going into detail and again particularly parts that i think

economists can inform so there's a pretty interesting literature, you know, in economics that looks at how to give vaccine designers, you know, like people like BioNTech and Moderna, the incentive to invest in what is a very risky thing, right? So if you look at vaccines in general as amazingly successful as the vaccine development process has been, there are, for every successful vaccine, there's like 10 unsuccessful vaccines, right? So there was a lot of money, billions and billions of dollars poured into developing vaccines that never worked. Famously in Australia, we have the UQ vaccine, right, which had this issue of giving false positive HIV test results and therefore never made it. I think it never made it even into the stage three trial phase, right? So if you think about that, it's really a risky decision to invest in these vaccines.

But on the other hand, the payoff to getting it right is so enormous, right? I mean, we're talking trillions of, I mean, the true economic value of these vaccines, putting aside the kind of human intangible value, is genuinely in the trillions of dollars, right? I mean, it's incredible. And so while it might be risky for any one developer to pour a lot of money into, For society, it's a no-brainer, right? We should put every dollar into every vaccine that we can even conceivably consider and not even worry about whether that's, you know, going to succeed or not, right? And so, you know, economists have written about this, but the idea is to kind of back every horse at an early stage of the process and provide investment, guaranteed investment, whether the vaccine works or not, to give the developers that assurance that even if it doesn't work out, that they'll be financially secure.

Right. So that's a you can think of it just like insurance. Right. But but the idea is to minimize the risk to encourage the development of the vaccine. So that's kind of, you know, in the US, there was Operation Warp Speed, which basically did this, right? Advanced commitments for the vaccines way back in like June 2020. And that kind of encouraged like a really broad variety of vaccine manufacturers to come through. And in the end, it has meant that across the world, we actually have a huge number of successful candidates, right? So what in the end looks like a no-brainer, right? We poured a few billion dollars in at the front end and got a few trillion

dollars in at the back end, right? It needed that kind of careful design, right? And again, that kind of economic thinking up front to ensure that it would actually happen. So Richard might want to comment on other aspects of the development process. But to me, that securing advanced commitments at the very earliest stages, I think was really essential to get a lot of these off the ground. I think that's exactly right. And I think Steve picks up nicely on the point that, you know, we're economists and we don't pretend to walk around with lab coats or know what a whole lot of our colleagues

in the public health or medical sphere know. So, you know, a tempting way to answer your question, Joe, is to say, well, there are three phases of clinical trials. The phase one trial where you do it on sort of 20 people and then phase two trials you do it on a couple of hundred people and then phase three trials you do it on a few thousand people. And those things are all correct and they there are really important steps in the process and you know we don't want vaccines that you know sort of are theoretically promising and have horrific side

effects and so there are very understandably a whole lot of steps in the process before things get out of the petri dish and into somebody's arm. But, you know, it's really important to think about the economic incentives for people to do that. So Steve definitely alluded to this, but I think one of the things that we think is true for all sorts of innovation to occur, when people can copy something, when they can free write off something or in the language of economics, when something's not excludable, the free market will tend to under provide it. And so this is why we've had patents on all kinds of intellectual property for a long period of time, where for a period of time, and it might be 17 years, there's various different intellectual property regimes. But for a period of time, the inventors of something could be a

vaccine could be some other form of invention or innovation, get monopoly rights to it, and they get to enjoy the benefits of it. And that's really important precisely because of what Steve said, because if what you feel is well, if I put a billion dollars into this as a company or $2 billion into it, and it fails, nobody's giving me a cent. If I put a billion dollars or this as a company or two billion dollars into it and it fails nobody's giving me a cent if i put a billion dollars or two billion dollars into it and it succeeds and it might make me 10 billion dollars and then i can't make 10 billion dollars off it because somebody can just copy it or the government's going to take it from me then i get all of the downsides for all the vaccines that don't work none of the upsides of any of the vaccines that

do work why would i be in this racket? And you would get an under-provision of innovation. So one of the really important things economists have come to understand over the decades is that sometimes you need to do something, sounds very non-economic, normally we don't like monopolies, we don't like market power, we like a lot of competition. Actually, to get innovation, sometimes you need to dampen competition for a period of time. And so that's some of the other issues that are surrounding this is one of the things we're very fortunate about in, say, the United States, where a lot of this technology was developed, but the same is true in Australia, is we have very well honed legal rules and intellectual property regimes that protect the rights of innovators so that they do

have the incentive to innovate. So people often talk about the importance of the rule of law for economic development. Well, this is one of those instances where, you know, well thought through and well protected legal rules are incredibly important to this kind of innovation, which, as Steve said, one level, you can say, look, it makes a lot of money. But on another level, this saves a lot of lives, this creates a lot of social value. But that's inextricably linked to the incentives people have to make the financial and human capital investments to get those innovations to occur. And let me just jump in there. Sorry, which is jump kind of, if we look at what actually happened, right. I mean, it's a miracle. It's amazing, but I don't know how many do you, I don't know, Richard, I haven't looked at this, but I wonder if we look at how many doses, you know, these

vaccines have been available almost a year. If we look around the world and look at what proportion of the world's population is vaccinated, I have to imagine it's a tiny fraction, right? So whereas each dose, you know, each dose of AstraZeneca is worth maybe, what, four to five dollars. Each dose of the mRNA is more expensive, maybe twenty dollars. This is the US. That cost-benefit analysis is absolutely passed for every person on Earth. If you were a world planner, right, where you got to decide, you know, how much vaccine everyone in the world gets, how much we should produce, I think there's no doubt that that cost-benefit analysis passes for every person, right? And yet, in terms of production capacity, even a year after we started, almost,

well, actually, yeah, the manufacturing started a year ago. We haven't even covered a fraction of the earth, right? And certainly we're seeing that in Australia, right? We're so much further behind the curve in terms of supply. So to the extent that we are sure we've been successful, but on the other hand, it's kind of stunning to me that we must have failed at some point because I think it's pretty clear to me at least there's probably

a significant underinvestment in production capacity globally compared to what would have passed like a global cost benefit analysis, right? So there was a big discussion and it's not resolved, but there was a big discussion about, you know, whether these supply constraints that have limited vaccine production are kind of real, or is it just that the supply curve slopes up, right? Could we have thrown more money at this problem and released more resources to generate more doses? Is just our failure to do that some kind of coordination problem, right, in our planning process? And it's hard for me to believe that that isn't the case, right?

I do think that in various ways, as a globe, we definitely undersupplied vaccines compared to what we could have done. So assuming the vaccine rollout is a race, I mean, no, it's not. It definitely is. Just assuming for a moment. Yeah, it is. It's a race against the virus, Joe.

It's a race against the virus.e it's a race against the virus yes well that that was that was my my question what's the appropriate yardstick is there like a reference group like should we be looking to our peers maybe oecd nations should the metric be more abstract should we be thinking about the virus as you Steve? Like, what's the yardstick in this race? Yeah, okay. So I think that all of those things are relevant, which is, you know, when we're coming last or second last or third last relative to OECD countries, something's going wrong. When we're, you know, not acting with a sense of urgency.

And so whether it was Brenda Murphy or Scott Morrison or Greg Hunt saying it's not a race when, you know, everyone in the country other than those people saying it was sort of like, what? Of course it's a race. Like, what do you mean? It's a race to reopen. It's a race to protect vulnerable people in the community. It's a race to be able to open our international borders.

Richard, I'm not sure that's true. I'm not sure everyone understood that earlier this year, to be honest. Even I think a lot of the country was complacent, no? Maybe that's right. Maybe it just seemed so clear to me at the time that I overestimate that. But in any case, let's say upon reflection, people should have understood that it was definitely a race. And there's lots of benchmarks for comparing against.

But I think one of the things that's really important is why the vaccine debacle has been so jarring. And I know I'll just speak for myself, at least to me, is Australia has an incredibly competent administrative state. So I spent about a decade living in the US. Steve still lives in the US. You know, when I went to get a driver's license in Boston, Massachusetts, now this is a wealthy city in a wealthy state in the United States, which is a very wealthy country. It is a joke trying to get a driver's license. That is an eight-hour enterprise, not to take the driving test, just to get into the DMV, to queue up, to make sure you're there at the right time, to do the various steps to do it. It's not a really highly functional

administrative state, at least compared to Australia. So you think about, you know, what it's like to go get a Medicare card or get a driver's license in Australia or pay a utility bill or all sorts of things that we, you know, take for granted in Australia. I think we should be proud of that. Australia is just like things work. I mean, the Australian administrative state is like an Apple product. It just works. You take it out of the box. No error messages. It's all just going. And on this particular thing, the vaccine rollout, we just failed spectacularly. We had the wrong purchasing plan. We put all our eggs into baskets, basically. We didn't think about diversifying, didn't understand there was a sense of urgency,

didn't have a plan about how we're actually going to get the jabs into arms. Oh, trust us, the GP network will work. And again, we have a really good way of vaccinating millions and millions and millions of people every year with flu shots. We have one of the world's great public healthcare systems. We're good at this stuff and we failed on this. So I think when you sort of come back to your question should we compare ourselves to israel or the us or the you know or mexico or new zealand yeah we should compare ourselves to all of those but let's compare australia's performance at this to australia's best self which is actually really pretty great and that's why i was so shocked and disappointed that we just failed by our own standards. Yeah, I mean, I agree with that.

And I would say, compare our performance at vaccine procurement to our performance earlier in the pandemic. I mean, that was a hallmark of, exactly as Richard said, a really terrific bureaucracy, effectively, right, or public health apparatus in order to achieve a goal. Now, I think, I guess, in hindsight, it's a little bit predictable because what the vaccine rollout required, it was asking of our bureaucracy and our kind of policy apparatus, it was asking very unusual things, right? So as I think Richard and I wrote in February 1 in our first piece, these people are not used to thinking in these terms, right?

They're not, you know, usually they've got a vaccine coming across their desk and they go, you know, it's pretty simple cost benefit analysis, you know, they're, you know, we're going to weigh the public health risks against the kind of benefits of this, which are considerable but limited. And they come up and then they think, well, you know, the cost of this vaccine is X.

The benefits are a little bit more than X. Okay, let's do it, right? And there's this whole process. Now, in the pandemic, that whole process is just out the window, right? Because the benefit of a vaccine that costs $20 is like 10 to 100 times more than that, right? Like the cost-benefit analysis is so extreme, as Alex Tabarrok said, you know, the world's easiest cost-benefit analysis because trillions is more than billions, right? By an order of magnitude. Yeah, right?

When you're dealing with order of magnitudes, this normal process is just not equipped, right? And moreover, you know, I'm sure we still don't have a lot of visibility over exactly what went wrong, but I'm certain that some bean counter somewhere in the Australian bureaucracy said, oh, why spend $10 billion when you can spend $2 billion, right? And just reflect on that for a minute, and I think Steve's point about sort of understanding

what times we're in is super important. In ordinary times, somebody who's in charge of purchasing like insulin for the pharmaceutical benefit system, if they can get a 3% saving on the exact same supply of insulin that comes at the same time, it's the same quality and all that sort of stuff, that's really good news. It might not sound like a lot, but we buy a lot of insulin. So that's great news.

Yeah, they get a promotion or something. Yeah. And that means that some other life-saving drug can get put on the PBS and that's going to save people's lives. Yes. And so I think purchasing kind of a boring job is super important and I can understand people who are like the purchasers And that's going to save people's lives. And so I think purchasing kind of a boring job is super important. And I can understand people who are like the purchasers for those things, who are negotiating with pharmaceutical companies over those seemingly small percentages. I can understand why that's the sort of mindset that they're in.

But somebody somewhere in the health bureaucracy has to sit back in and say, trillions, thousand times more than billions, right, has to sit back and say, hang on a minute. If we overpay, quote, overpay for COVID vaccines, but we get them faster, we get one that works, we get one that works faster, we get one that's got higher efficacy than another one, you know, just let's think for 10 seconds about how much value that creates. And then you just stop thinking about 2%, 3%, this or that. And that's why I think Steve and I said, at one point, you know, the idea that a government failed to cut a deal with Pfizer, because we couldn't come to commercial terms, there's basically nothing that they could have offered with a straight face or frankly otherwise that we shouldn't have accepted. It was so valuable for us.

So this idea that there wasn't, you know, Greg Hunt said this a while ago, there was no deal on the table. Well, that's right. You'd go to them and put a deal on the table. That's what the Israeli prime minister did. Went and said, what is it going to take, you know, for us to get a big supply of this vaccine? And again, I don't blame people sort of in the middle of the Department of Health or the health bureaucracy. But at some point, somewhere in the leadership, those people's job is to say, hang on, let's look at the big picture here. And it would seem that nobody did. I mean, if anybody in that meeting on Australia's side, in any of those meetings, asked the question how much,

they had no business asking that question. Right? Literally. I mean, look at what these lockdowns, it's very clear that if we had 80% vaccination, what's happening today in Sydney would not be happening. What's happening in Melbourne, in Victoria, in ACT, none of that would be happening, right?

So the tens of billions of dollars that's costing our economy was the cost of skimping on vaccines back in mid-2020. So, you know, if we were going, oh, boy, we, you know, oh, ordering a duplicate set of vaccines that might cost another billion dollars, if anyone even asked that, they had no business doing so, right? So, I mean, and all we can do is look at what we actually did

and when we actually did it. And if you're telling me that at no point since the vaccine was developed in 2020, the Australian government could have gotten access to more than the 10 million doses it originally ordered. I mean, I just don't believe you, right? At some point, that was on the table because other countries got access to it, right?

So at some point, someone had to say no, right? And again, we don't have full visibility over this process, but what I've heard, I can't remember who it was, maybe it was Jane Holton or Brendan Murphy, but someone said, oh, you know, mRNA was unproven technology. It doesn't matter. Just buy it anyway. And if it ends up not working, well, too bad. You've wasted a little bit of money. if it ends up working wow look at the upside so again this just spectacular failure of appreciating the magnitude of the cost benefit analysis to me is is is kind of the prime reason we're in the situation we're in and again not something the public service uh even the cabinet process, is used to contemplating. Just to drive this point home, Richard, explain the concept of option value. Yeah, so an option, let's just go to what an option is, right?

So an option is a financial instrument and it's basically a contract that says I have the right, the holder of the option has the right to buy, that's a call option or sell, that's a put option, some underlying security. So the options that people that your listeners might be most familiar with is an option to buy a share of stock. So you might be able to buy BHP options. And that's going to specify, you know, how long that option is good for. So for the next six months, I can buy the option and I'll have a strike price. It says at this, you know, I can buy it at this price and it's my option. I don't have to do it, but I can do it if I want. So that that's obviously good. If you're looking at buying

equity securities, if the security goes down in price, you don't exercise it. If it goes up in price, you do exercise it and make it. Now, you normally pay something for that in order to have that option. The key thing is it gives you flexibility. And that basic idea that optionality, that having the option to do something in the future, the right to do something in the future is valuable, applies. And financial economists, other economists have applied this to a whole range of thinking, even using the famous Black-Scholes option pricing formula to price so-called real options, things in the real economy that aren't financial instruments. The basic insight is pretty simple, which is that options are valuable. Having the right to do something if you want to do it, but not the obligation to do it if you

don't want to do it, is really valuable. And so purchasing vaccines, perfect example. If you've got a Ford purchase agreement says, okay, I'm going to have to pay you a bunch of money, but if I want, I can ask you to deliver me a whole bunch of your vaccine. That doesn't mean you have to use it. It doesn't mean you have to put it in Australian's arms. It means you can resell it. You can throw it in the bin. You can do whatever, but it gives you the option to use it if you want. Those things are valuable. And very often, in a world of great uncertainty, where you don't know what's going to happen,

options tend to become much more valuable. That's part, in fact, volatility and the variance of the underlying asset is part of the famous Black-Scholes option pricing formula for, say, stock options or other financial options. And the same basic idea applies to real options, that when the environment's incredibly uncertain, option value is big because who knows, you might need a lot of this stuff. And that principle applies here. So what does that tell you? Well, right away, that tells you,

you don't want to limit yourself to one type of mRNA vaccine and one type of viral vector vaccine and one type of protein vaccine, you say, can I get Pfizer and Moderna? Yep, I better get the option to buy both of them. And if I have to pay something for that, that's fine, because in a world with so much uncertainty, that option value will be huge. So in contravention of that principle or that approach, in the initial procurement strategy, australian government selected one vaccine from each technology so in the mrna bucket they picked

pfizer over moderna in the viral vector bucket they picked astrazeneca over johnson and johnson in the protein vaccines bucket they picked nova vax over sanof? I've got two questions about that. The small question or the specific question is, why do you think they favoured AstraZeneca over Johnson & Johnson? And do you think it was the halo effect of Oxford University? The Oxbridge positive effect? So while Steve's chuckling, I'm going to put a couple of ideas on the table and then he can he can pick um so it's a couple of things right one is the sort of cultural cringe about oxford

university and the you know um this is why this is why we kind of uh have i think overblown respect for road scholars in this country um and so no offense to some very from road scholars looks hate some of my best friends are road Scholars, but let's be real. And, you know, that's one candidate. I think the other thing, though, is that there was really – and on this I think there's a good reason and a bad reason to it. So the other thing is local manufacturing. So in terms of AstraZeneca at least, CSL, as we know,

could manufacture that locally. Right. So in terms of AstraZeneca, at least CSL, as we know, could manufacture that locally. So why is that good? The reason that it's good is it protects you against the so-called holdup problem, which economists like me worry about a lot, which is, you know, what if there are export bans or import bans, or what if it's really hard actually just to fly things around the world or something like that? Having the ability, the right, again, sort of option value, to produce things locally can be very valuable. So that was a totally legitimate concern. I think Steve and I always said in all of this,

the argument for saying let's be able to have local manufacturing in the sense of basically strategic supply chain management was a perfectly legitimate concern. I think the worrying thing for me was it's almost like they were trying to do multiple things with one policy. So it sounded like, oh, you know, it's sort of got a bit of a strategic supply chain management to it. It's going to help out CSL and it's nice to help out local companies. It's sort of like backdoor financial support and part of the fiscal package.

So we can kind of double dip on that. I think they did a similar thing with hotel quarantine. It's perfectly understandable if you don't have a whole raft of Howard Springs type facilities that you use what you've got and you've got hotels. And that's perfectly fine until you can build a lot of purpose-built facilities

like Howard Springs. But the idea of, oh, well, maybe this is a way to sort of help out the hotel industry while they're in a jam, that's a bad idea. If you want to help out the hotel industry, give them money. If you want to have good quarantine for people, have good quarantine for people. So I think with the vaccines there, there was a lot of sort of competing objectives, some of which I think were legitimate and some of the things were misguided. Yeah, I mean, let me add two things. objectives, some of which I think were legitimate and some of the thing were misguided. Yeah.

I mean, let me, let me add two things. One, clearly I think we had a bit of an obsession with homegrown stuff, right? So we, the big horse that we backed was UQ, uh, cause it was the Aussie one, right? And we were a- It's almost like Dick Smith was in charge of the procurement. We're a sort of parochial country, right? So that's kind of standard for Australia, which is unfortunate, but it is what it is, right?

So we backed UQ. And then we backed the second horse was AstraZeneca, which is the closest thing to Australian is British, right? And so we'll go with the British one. And yes, okay, we can make the British one onshore. So there was this huge focus on domestic development, domestic production, which as Richard said, you know, there's some value to that. But let me just add this, which is not a single dose of mRNA vaccine, not a single dose has been blocked from export from the EU.

Not a single dose. The only trade restrictions were placed on AstraZeneca vaccines, right? Because AstraZeneca committed to more doses than it could actually produce, right? And so there was an argument between different people who'd contracted with AstraZeneca for those doses, including Australia. So, you know, I am frankly skeptical of the trade risks argument because, again, in no other vaccine other than AstraZeneca was that an issue. So I really think this obsession with both domestic development and domestic production just received way too much emphasis compared to what it should have.

But I want to add, it's not a matter of which one because the whole point is we should have picked them all, right? So this notion that we need to choose is just a totally false notion, right? There was no reason to say, why did we pick this one versus this? Just pick false notion, right? There was no reason to say, why did we pick this one versus this? Just pick them all, right? Order Johnson & Johnson, order AstraZeneca,

order Moderna, right? Order Pfizer, order Sanofi, order the ones that didn't work. It still would have been worthwhile. And if we had done that in mid-2020, we just simply would not be in the situation we're in today, right. And it's worth noting one other thing, and I'll pick up on a point that I made before, which is, you know, when we were advocating this, you know, December, January, this idea of,

you know, major overlap, you know, redundancy in the vaccine policy. A lot of people said, we don't need them. Other countries need them more, right? That was a big strand of counter argument that people brought up. I want to say two things about that. One, that's naive to think that we wouldn't need them just because we didn't need them at the time. And as we can see now, actually, yes, we did need them, right? Because Australia has outbreaks with an unvaccinated population, which is some of the worst sort of circumstances in the world right now in terms of the virus. The second thing is we shouldn't pretend that supplies are fixed. So, you know, new facilities were built in the third quarter of 2020, a whole new mRNA manufacturing facility was opened in Germany, for example, to increase supply, right?

So I think it's absolutely true that provided those commitments were made early enough in the kind of June, July 2020 timeframe, that certainly by now, additional supply could have come online to satisfy all of the additional orders. It's just that there were a certain number of orders from all the countries across the world. And so that gave us a certain amount of supply.

Now, after the fact, a lot of countries thought, oh, bugger, we didn't order enough. But at that point, you can't just, you know, materialize a production facility out of nowhere. You kind of needed to do that a year ago right so i think this this idea that there was a choice right that one australia ordering it would have taken it from you know countries more in need and two the fact that there was a limited supply i think is a myth uh so in practice i think there was really nothing stopping us from from generating this kind of redundancy and at the very, if we had got all of those additional doses, we could have given them to our neighbors, right? Yep.

Send them all to Indonesia. It would have been like an... The returns on something like that... Massive. ...for our relationship and security would have been huge. Yes. So here's the bigger question,

and perhaps this will forever remain a mystery, but taking the option is a basic and well-known notion how does the australian government with all of its intellectual firepower with its historic competence as you explained earlier richard how does the australian government stuff this up on such a grand scale? Not enough people taking first-year university economics would probably be the first. I guarantee you anyone who'd taken a good first-year economics course would understand this stuff very well. There's actually probably a little more truth to that than you might think. But I think the second thing that's a slightly more serious point to make is, and I'm not an expert on this, so I'm going off what i've heard but i've heard it from from a very wide range of people across the political spectrum

is there's really been a systematic uh thinning out of the australian public service across all departments across a number of governments over a number of decades and in fact quite a lot of people say that this started during the the haw government. And again, others will know the history better than I do. But I think there really is a thing where a really high quality public service would be a real guard against this. Now, I personally know of a lot of fantastic people who work in the Australian public service in all kinds of different departments and at all levels. But I think it's also pretty clear that, you know, this government, and I think Scott Morrison said this when he was still Treasurer, has made it pretty clear that people in the public service are there to sort of execute on orders, and they don't really want them to think

very much about policy, and have really said as much. And I think that must be quite dispiriting for people thinking of going into or staying in the public service as sort of like, you can shuffle some papers around, but please don't think too hard about things. I think the second thing is that if you tell people and provide a whole lot of career based incentives to not speak your mind about things, then people won't. And so I think if we had a culturally different public service, and I think this is the fault of government, not the fault of the very good people who are in the public service, I think we'd be in better shape. But others know more about that than I do. Yeah, I mean, I worked at Treasury for a few years, and I know a lot of

people there quite well. I will tell you when Richard and I started writing our articles back in February, back on February 1, after that date I did get a lot of messages from people who said anyone who's dealt with the Department of Health in any capacity is completely unsurprised by the outcome that we see. So not knowing the Department of Health well myself, that's just references from a bunch of people to that. The second thing is, I think Josh Frydenberg, the Treasurer, and Stephen Kennedy, the Treasury Secretary, have shown throughout the pandemic that they understand this, right? Through their policy decisions, all the way back to March, they had no qualms, they threw the

penny pinching mindset right out the window. They just said, spend whatever we need to spend to support the economy at this difficult time. And they did things that you would never imagine a liberal government doing, right? They spent $100 billion on a wage subsidy scheme of all things, right? The size of fiscal stimulus is unprecedented. So they were willing to throw the old rule book out the window. They understood this notion of not worrying about waste at a time where the consequences of not wasting money are even more waste, right, in terms of wasted human capacity in unemployment and human suffering, frankly. So to me, I cannot imagine that Treasury and the Treasurer were heavily involved in the vaccine process, because I can't imagine that they wouldn't have said,

hang on, this makes no sense. So I don't know. I don't have visibility into exactly how this went down. But one possibility is that there was just incredible siloing in the cabinet, right, where the health minister had full control of his portfolio, and that perhaps this was not in detail dealt with by other ministers and or other departments, right? So again, we don't know, we don't see. But it's difficult for me to believe that, you know, Stephen Kennedy, who's a truly brilliant person and is able to, you know, think creatively and out of the box about all sorts of things, would not have known that we ought to have purchased more vaccines. So something broke down, I think, in the kind of cabinet process to prevent kind of a broader voicing and a broader kind of consideration of these concerns.

So if that is true, Steve, it's almost an example of this economist should stay out of health decisions kind of thinking writ large. Yes. I mean, and boy, again, how much harassment have Richard, have you and I received by people saying, oh, what would you two bloody know about vaccines? And every time we have to remind people that it could be dog food. Like it doesn't matter whether it's a syringe or something else, right? It's a procurement problem. It's an investment problem, right? It's not, it's, it's not a medical problem. And frankly, doctors have literally no idea about procurement questions, right?

So the last person you want to ask is a medical expert for this question. So yes, exactly. I mean, again, we don't have visibility. So I really hope that in the aftermath of the pandemic, we have some kind of review or commission that can work out what went wrong. You know, that will be prevented, no doubt. But, you know, to my mind, I think it would help a lot in future pandemics, and this very well may not be the last, to understand exactly how the system broke down and exactly

how the right voices weren't in the room. Another example, Joe, I don't know if you plan on getting to this, but another good example of what you just described was a tagi, right? A tagi, which Richard and I have written about and complained about quite loudly, is a body that contains, it's a technical advisory group. The word medicine, doctor, you know, health doesn't appear in that acronym, right? It's a technical advisory group on immunizations. The fact that that technical advisory group on immunizations doesn't contain any economists, it's absolutely nuts, right? And yet here we are. So yes, I think it's very important to understand why the right people were not able to voice

concerns, to sound the alarm, to kind of warn against a lot of all of this, because it was very predictable. And I was looking at this, you know, I mean, I think I started tweeting about it in December, right? And even that was quite late. I think if I had some sense that they would have been handling it behind the scenes, but even if we'd done something about this in December, we could have, you know, radically improved the position we now find ourselves in. So that's procurement. What about distribution? How does the distribution piece rank against the bungling of the procurement? I think it's maybe not as bad because it was more fixable,

but it's sort of another symptom of, I think, the same problem. And it's another thing where just some very basic logical thinking about things like opportunity cost and incentives would have been really helpful. So my reading of the situation again, and, you know, we keep saying there's not much visibility into this. I must say there's been a sort of view about what's commercially in confidence that goes well beyond what I learned in my five years in the commercial world and four years doing private equity deals and so on, which is, I'm not really sure how the deals you cut with pharmacies and GPs are suddenly super secretive, but anyway, they are. But what really seemed to be the case to me, at least as an external observer, was that federal government saw this as an opportunity to take credit for doing something really good. And if they'd done the vaccine roll out well, they would have got the credit for it. And so it looked like a classic example of, well,

this looks like something that will look very good for our re-election campaign. Let's grab charge of it. Let's tell the states, you just sit in the corner and wait quietly and we'll take care of it. And we'll kind of deal with GPs, another important constituency for a federal government. We'll deal with the GP network. Of course, GPs have other things to do. The government made it very clear that they didn't want GPs to sort of profit or make any money of it. This was going to be free. Well, if you say to a GP, you know, they've taken an oath to take care of people and you say, well, you've got to do this thing that you're being mandated to do, and that's going to stop you taking care of other sick people and living up to your oath. It's going to be pushback about that, right? They want to help out, but there's going to be

pushback about that. So that seemed to be never really clearly thought through. There was no taking advantage of what's turned out to be a very important way of getting jabs into arms, which is mass vaccination hubs. So again, really early on when the health minister was saying, you know, it's all good, the GPs will take care of it, don't have any details for you now, but trust me, Steve and I were saying, well, hang on, let's just look around. What's going on at places that actually are getting jabs into arms? Oh, in LA, they're using Dodger Stadium. And, you know, people was driving into the car park at Dodger stadium and you know people was driving into the car park at dodger stadium and getting jabbed and driving out again and they're getting thousands

and thousands and tens of thousands in some cases of jabs done a day at these mass vaccination hubs so you know as soon as the state governments got some authority to do these things coladis bergiclian and her team managed to managed to spin up a max vaccination hub at Sydney Olympic Park and obviously there have been several others elsewhere since then, but they spun that thing up in a matter of days basically and it's been incredibly effective. So I think it was really bad on the execution. One of the most frustrating things of all is we'll never actually really know where the real bottleneck was because the government botched the purchasing of the vaccine so badly, that it's sort of hard to

tell how much it would have been constrained by the rollout had they got that right. But I think they suffer from the same lack of thinking about, okay, what's the most efficient way to get this done? What incentives do people have to do this? What happens we don't do x what else will happen and those just really basic matters of logic yeah i mean i i agree with that entirely i think in practice yeah the distribution didn't really matter so much because we didn't have the jabs to distribute right so it's sort of like well uh you know in a sense if we'd had mass vaccination jobs in february they would have sat empty because we didn't have a mass issues with astrazeneca production and and importing and and then the the clotting issue that caused a lot of uh you know limits and and apprehension if we didn't have all of those things we would have had maybe we would have maybe if everything had gone

right had enough doses and then we would have seen the the distribution channels really not be up to the task and and i think yeah as richard said not not a radical over-reliance on GPs, which is, you know, there's maybe something defensible there where people wanted advice, but I think that's a symptom of excessive caution, which really infects our whole public health system, public health apparatus. But the second issue is, you know, the AMA is a powerful lobby. Doctors are a powerful lobby, especially for the Liberal Party. And so it's hard to not imagine that we focus on GPs because there are, you know, there's political incentives to do that, right? We under-focused on public health system, which is crazy because the public health system is the service delivery mechanism in terms of health services in Australia. And the big one

is pharmacies, right, which are very late to the piece, but again, are so important to the annual flu drive, they seem perfectly attuned to rolling jabs out very quickly. So yeah, look, I think they've kind of recovered significantly and I think the distribution system is doing really well now, but it took a really long time to get here. Let me play devil's advocate and then get your reactions. So assuming we can't or don't want to ask people to accept multiple vaccines, Australia should be using or should have been using the vaccine that

reduces transmission the most but we didn't yet know which one that was so there was actually an option value in having a slow rollout because it meant we could once we realized switch to the more effective vaccine reactions we've imposed a bunch of artificial constraints on the problem right like so but let's but let's look you know but they're worth they're worth going through so so i think the core one there was you said it's basically difficult to have you know two vaccines because people are always going to compare them i think you know maybe you correct me if i'm wrong but i think that was implicit in your statement i think that you know, there's a degree of truth in that, but I'm not sure that's the sort of primary consideration. And I think the other thing that comes along with all of this is there's the

ability to mix and match vaccines that has overseas actually proven to be even better. And Canada is an example of this, and there are others where mixing and matching between different types of vaccines can be very effective but you know if you have a regulator that allows it turns out you can do that if you have our regulator not so much and you know the other thing is the sort of booster shot stuff so imagine we had been in a situation where information had come in we're sitting on a whole bunch of Pfizer a whole bunch of Moderna and a whole bunch of AstraZeneca and we say actually right we want to use AstraZeneca now and then do booster shots with Pfizer later on. We would have been in a position to do that. It's the option value thing again. Imagine what we'd say it is, actually, we want to stratify it,

not by age group, but by some other parts of the population. That could be geographic, that could be, you know, obviously, there are different refrigeration requirements for these things. So maybe, you know, certain regional areas might have had some, others might have had others. I think, right, the sort of vaccine equity within Australia, there's the international dimensions are very important. We've talked about that. But vaccine equity within Australia has been an important part of this. People feeling like they're getting a B grade product, even if that that's unfair it's just a very natural feeling for people to have because i'll put up a lot with this and you know i'm whatever years old and i've paid my taxes and i've done all the right things and i've done everything

the government's asked of me and now i'm not getting like the best vaccine that i could possibly be getting i think that's really big part of where the messaging campaign could have done a much better job i think if the mindset people have been in was people have been straight with me about the pros and cons of these vaccines. I understand how important the whole community getting vaccinated fast is. And, you know, there are potential sort of sacrifices at the margin. I'm not getting exactly what I want, but I am contributing to that broader effort and it's better for me as well. I think people would understand that.

Contrast that with the communication campaign we had. It's not a race. I obviously stuffed up, but I can't admit that I've stuffed up, so I'm going to blame somebody else. You've got a health minister saying, you know what, we're going to have heaps of Pfizer coming, so if you want to wait,

you don't have to take AstraZeneca now. And what happens? Bookings for AstraZeneca cancelled, you know, the second the words come out of his mouth. And so I think that, you know, people are willing to, particularly Australians, I think, are willing to understand a lot and they're willing to sacrifice quite a lot. But, you know, there's only so much incompetence that they can put up with. And at some point, that's fair enough. And let's say, I think the, again, a point I mentioned earlier, we never have full visibility over every aspect of each vaccine, right? I mean, we're learning more and more every time about their longevity, about side effects, right? The clotting issue, we could not pick up

in the clinical trial because there were 30,000 people, right? And it's just not a big enough sample in order to draw that issue out. So we always have to kind of learn as we go and that might scare people. But when you're in a pandemic, yeah, it's absolutely worth learning as you go because if you don't, the alternative is to dive COVID, right? So let's just actually focus on having a pretty good chance of protecting people.

Now, if you just looked at the stage three trial data, mRNA vaccines look significantly better, significantly more effective against infection compared to AstraZeneca. And, and, and, you know, I've been attacked for, for being anti-AZ when I'm absolutely not, other than to point out the fact that in the stage three trial, mRNA was more effective. It was 95 versus 65 in, in some cases, right? So there was a significant difference in efficacy against infection. If what you cared about was infection, because you wanted to limit transmission or whatever, it made sense to favor mRNA over AstraZeneca. But in practice, the two vaccines are actually similarly effective against hospitalization and death.

They're similarly effective against sort of hospitalization and death, right? They're similarly effective. So if you move to a world where you care less about transmission and you care more about, you know, protecting people's health and lives, as we seem to be moving towards with Delta, then suddenly you care a lot less about the differences between these different vaccines in terms of policy, right? And the second thing is, given how infectious Delta is, there's so much of a greater chance that any given person will get the virus that they are also willing to overlook any downsides of these vaccines, right? Say this minor, small clotting risk. And so we're seeing, for example, in Sydney,

tens of thousands of young Sydney people going to pharmacies and getting AstraZeneca in their arms. So I think the point here is you need to have all of the vaccines available. They need to be there as we learn more and more about how they'll work as the virus evolves so that, you know, whichever vaccine can do the job at any given time for any given person can actually be put into their arm. That's what matters, right? The capacity is there. And so regardless of which one wins or which one's favored at any given time, that's no reason to take any of them off the table. So I want to go to testing and then quarantine and then finish with the way forward. But before

I do, is there anything else either of you wants to say about vaccine bungling? I think we've said a lot at various points in time, including on this podcast. Yeah. I mean, all I'll say is I think we're in a good place now. I think, you know, the rate of vaccination in New South Wales is spectacular and they look to be going really well and going, you know, and the government is even doing stuff like going to Poland and saying, hey, give us your spare doses, right? So there's a lot of activity happening and it's all moving in a good direction. One thing I worry about is

when Melbourne had an outbreak, we got a big surge in vaccinations. And as soon as the outbreak ended, so did the vaccinations. So people are very, they can't see more than two feet in front of their face in terms of the vaccine. It has to be highly salient in order to drive the process. So, you know, maybe that'll stay that way in Sydney for some time, but look at the rate of vaccination in Queensland or WA. It's pretty slow, right, where the virus isn't out and about. So I think, to my mind, while we're doing really well and the vaccine rate is rising, we really need to get that number as high as we possibly can.

And so imagining that from now to December, everything's just going to go fine and we don't need to do anything, I think it's pretty naive. And there is all sorts of things, all sorts of things the government can and should do to try and get that number as high as possible, as quickly as possible. And if that means, Richard and I have proposed lots of different things, right?

Lots of different methods to incentivize vaccine take-up. But to my mind, that is the focus now, is getting that rate up in every state and territory in Australia as quickly as we possibly can. And again, using any tool, not worrying about the financial consequences, just try it all, you know, pay people $300, sure. Give people a lottery ticket, sure.

You know, vaccine passports, just throw everything we possibly can at this at this problem to get that rate up so vaccines are an important piece of the puzzle at this point probably the most important piece but they're they're not the only piece of the puzzle i want to talk about testing steve during queensland's recent outbreak you went to get a test can you tell me that story oh i mean it's so frustrating i mean i'm sure many many people on listening to this podcast have have gone down and got a test in the last week say i was pretty amazed because there were two locations i'm on the sunshine coast there

were two locations i could go to to get a test um i went to nambour Hospital, which is about a 30 minute drive from where I am. And I got there and there was a massive queue. And I asked the nurse attending, you know, how long is the wait? And she said, well, the wait is longer than when we close. So you should just come back tomorrow. And I thought to myself, I don't think I have COVID, but imagine if I do have COVID, like I just go and live my life until I can come back tomorrow and get a test and find out that I've been spreading the virus around all this time. And the fact that, you know, 18 months into this bloody thing, we haven't solved something as elementary as testing people to work out whether they have COVID. And again, spectacularly failed this cost-benefit analysis right it's just mind-blowing to me and and obviously both very frustrating and also incredibly dangerous because we we have no idea who has COVID and what they're doing what about quarantine similar to testing at this point in the pandemic, this just feels like a no-brainer,

like something we should have worked out. And yet we're still housing people in hotels in our biggest cities. Why hasn't the government bought up land somewhere and built specialized facilities? Why are we still allowing COVID to leak out of quarantine facilities? How has that even happened?

It's completely bizarre to me. I mean, let's start with some of the legitimate, the couple of legitimate points about this. You can't just put these things anywhere, right? They need to be near a hospital and various other things like that. That still leaves a lot of territory for these places to go. We've even got a kind of exemplar of it with Howard Springs facility near Darwin. And so we know how to do this. We do do this. We knew this at the time. I totally understand

that we had to make do with what we had very early on in the pandemic. And I think in that aspect, the hotel quarantine stuff actually worked remarkably well managed to keep most of the people inside the hotels you know the odd example of that you know guy jumping out a window in wa and things like that but more or less we managed to keep it in the hotels there was the the very very uh foreseeable but unfortunate situation with the leaks out of quarantine in in melbourne um you know when you start using private security for these sorts of things and these people have multiple jobs aren't wearing wearing the right PPE and all sorts of things like that. There's that issue as well. But why we didn't fairly early on in the pandemic say,

this stuff's going to be around for a while, let's build the facility. But even if you thought this is a once in a century thing, and this will never happen again, despite the fact that, you know, Bill Gates was telling you this is going to happen every you know doctor who works in infectious diseases says no no like this will keep happening unfortunately this stuff's going to keep going on even if you didn't listen to any of that and he just said like let's build it it only costs so much money it's not a dead waste you. It pumps money into the economy. Now, there's opportunity cost. You'd rather spend the money on something more productive. But even if it was going to be a one-off thing for this pandemic, it would have made sense to invest

in those facilities. So why that didn't happen, I really have no idea. And this feeds through into other things that I think you're going to hear more about soon and we're already starting to hear about. So when we understood what was going on with airborne transmission and ventilation in hotels, so we had live examples of the virus getting across and down corridors through air ducts and things like this. Do you think that's going to be an issue going forward in commercial office buildings and government buildings and schools and all sorts of things? So where's the plan for how we're going to deal over the medium term with ventilation issues in this country? Again, Australia has some genuine world experts in this stuff. We're really good at a whole bunch of these things. And maybe there's some secret plan that's before cabinet to deal with this.

But it seems to be the case that there's really no planning. And again, you know, we'll get to where we get to. We'll get to, say, 80%. The country will open up to a degree or a very large degree. And then there'll be cases of ventilation problems in office buildings. And someone will say, oh, gee, now we need to deal with that, but there'll be a lead time to it. So again, I think it's just sort of systemic failure on all of these things. And to me, I mean, I think of it as just another example of this cost benefit analysis failure, which is, yeah, okay, a couple

hundred million dollars of facility costs, big deal. What does it cost us that the leaks have led to massive outbreaks that have cost the economy tens of billions of dollars? I mean, it's just, again, a catastrophic failure of cost-benefit analysis, not to make modest investments that can end very badly for you. So the other thing I would pick up on hotel quarantine is there's a lot of misunderstanding out there in places like Twitter and among journalists about whose responsibility it is, right? So much of the conversation has been about sort of blame shifting between states and feds. But the truth is quarantine is a shared responsibility under the constitution. So anyone who tells you, for example, the opposition leader, that quarantine is solely a federal responsibility,

it just has no idea, right? Because it's not true. The states and the feds share that responsibility. And that's exactly why the states are doing it, because they have the constitutional authority to do so. A lot of people say, oh, the feds should have picked that up as a responsibility. But to be honest, given the way the feds have handled the... Yeah, I thought that's where you're going, Steve.

Like they dropped everything else they picked up. So I'm not sure. You really want them to be the ones handling a kind of very direct service delivery function that is moving people from airplanes into quarantine facilities and then into the community i'm not sure and moreover there's no reason there is no reason why the states should not have been able to handle this well there's no reason they ought to have been able to do it. People fly into states, different states, right? And states have

quarantine facilities. States have very low borrowing costs. There's really nothing stopping a state government from investing in these kind of facilities. And so the fact that they haven't done it, I think, is frankly on them. And moreover, one of the benefits of having the states do the quarantine management on their own is they can learn from each other right like i'm sure other states took lessons away from the victorian failures of hotel quarantine last year to upgrade their facilities so having each state do their own thing is actually an opportunity for experimentation in a way that can be really helpful so i just don't buy these arguments that this is kind of scott morrison's fault or you know some failure of the federal government I think the states have a lot to answer for um on the failings and hotel quarantine and

and and again the fact that Queensland is only now announcing that they're going to go their own way and build a facility I think is completely crazy uh and it's a decision that should have been made a year ago in thinking about the ultimate causes of the Sydney outbreak that now has us all locked down is it accurate to say that either a higher vaccination rate, say at least 80% of the adult population being vaccinated, would have hobbled or prevented the outbreak, or better quarantine facilities would have hobbled or prevented the outbreak? Were they both sufficient? I think both things would have made it a lot better. So, you know, I don't think we know exactly whether, you know, 80% of the 16 plus population would have been enough for contact

tracers to be able to get this under control and not have an outbreak that was very meaningful. But for sure, what we know is it would be better than it is now. What we know is if we'd had 80% vaccination, there is zero chance that there would have been over a thousand cases yesterday and things like that. So it would have been better. There is no trade-off on this one, which is a faster vaccine rollout would have made everything better. And so, you know, whether it's the quarantine or whether it's the rules about a limousine driver, you know, not wearing a mask and not being vaccinated. I think those are all part of the sort of the quarantine ecosystem, if you like.

And so, again, it does look in one sense like hindsight's 2020. So look back and say, oh, this one individual caused this thing to happen, but it's a system-wide failure. I mean, you also look back at that and say, who could possibly have put rules in place when followed to the letter of the law, led somebody to interact with very high risk individuals without adequate protections, and then just go back into the community in the evening, and then go back and do the same thing

the next morning. That's just a clear systemic failure. Yeah, I mean, I think we could have prevented the limo driver. I mean, the limo driver has said that he was waiting for Pfizer, right? So it's hard not to point to the vaccine rollout. You know, the potential he would have both contracted and then transmitted the disease is significantly lower, right, were he vaccinated. But more importantly, you know, yes, a broader vaccine coverage may have, well, would have for sure reduced transmission across New South Wales. It would have radically reduced hospitalizations and deaths, right? So we're seeing Gladys get up every day and saying, here's this, you know, low single digit figure people dying, some of whom are

in their 30s, none of whom are fully vaccinated, it's virtually none of those people, virtually none, would have died were they vaccinated. So regardless of anything else, you know, whether the outbreak would or wouldn't have happened, its consequences would have been significantly less. And in fact, we may not have cared so much about it, right? We may not have implemented such aggressive lockdown measures, because at that point, we would have been thinking about the virus differently. We would have been willing to tolerate cases to a greater degree, and we wouldn't have had to suffer the death toll that we have. So Richard and I have been saying all year, we need the vaccine rollout to go faster because there's always the chance of another outbreak and we cannot be complacent in our bubble.

And I'm extremely sad and disappointed to say we were right. So what's the way forward? What should we be doing that we're not currently? I think there's a couple of things. We've got a plan about when we're going to start to shift mindsets and start to open up. And I think there is totally legitimate, if you like, epidemiological debate around whether 80% is the right number. And I think there's, even if you take 80% as the the number there's a legitimate set of arithmetic questions around 80 of what is it 80 yeah yeah what's the denominator right so is it 12 year olds you know which is by the way well above the age at which kids know what a denominator is so this is

a hard set of questions to be answering um and and i worry a lot about politicians getting into November and starting to redefine the denominator and things like that. But there is a question, even if you take the 80% numbers, 80% of what and 80% plus how long, 80% plus the two weeks or so that it takes for the vaccine to ramp up to provide as much immunity as it can. That plays into things like the recently announced New South Wales Schools Plan,

which talks about kids going back on in certain grades on October 25th, where all teachers will have to be vaccinated. Well, will they have to have been vaccinated two weeks before October 25th? So these things are all important questions. And I think there'll be very important questions about basically about how we open up. So those are sort of about when we open up. And there's essentially a plan for that. But I think there will be discussions around the margin. But the big debate, I think, is about how we open up. And how we open up is an important debate about what we're going to do in addition to vaccination. So are we going to have a mask mandate on public transport going forward? I don't know what Steve thinks about this, but I would say, yeah, that looks like a good idea to do that. It's a relatively low cost measure. It's something we've seen work elsewhere in the world for very long periods of

time before all of this happened. And it seems like a bit of a no brainer. It's a bit of a pain to have to wear a mask on a bus or a train. It's not that big of a deal and if that if that helps then that's a good thing to have you know mask mandates for kindergarten kids 50 years from now in in schools at all times i i'm skeptical that that sort of thing is gonna is gonna fly so it'll be all these debates there'll be debates about you know mask wearing about ventilation and very importantly as steve talked about earlier and you mentioned joe about the, and very importantly, as Steve talked about earlier, and you mentioned, Joe, about the carrots and sticks around what you can do when you're vaccinated or when you're not vaccinated. And some people call this the sort of vaccine passport question. But I think we're going to have to have an important national debate about the degree to which we're going to allow people who choose not to be vaccinated to impose costs

on other people. And we in this country are always, I think, going to say, and I like this about Australia, we're not going to pin you down and shove a needle in your arm. But if you make a choice that has big external costs on other people, that imposes big spillovers that are negative on other people, what we economists call externalities, then we're going to try and take account of that. And we already do that with no jab, no pay rules for kids being vaccinated in terms of going to schools. We do it in a whole range of other things that we either subsidise positive behaviours or tax or ban in some ways negative behaviours. So what I would like to see is something along the lines of what Steve and I have already written about, which is if you have proof that you've been double vaccinated and going forward had the required booster shots, it would be basically free to act as if it were December of 2019. And if you choose not to

be vaccinated, then you're making a choice that when you want to go into a public space like a shopping centre, that you have to take a rapid antigen test, wait the 10 minutes or whatever it takes to do it, pay the $15 or whatever it costs to do it. And if it's a negative test, then you're free to go into the shopping centre. And if that's what people want to do, if they don't want to be vaccinated, it's a free vaccination. If you don't want to be vaccinated, then you're making a choice that you're willing to go through the equivalent of airport security to do a whole lot of things that you didn't have to do before that. And I think that's an important national discussion to have, and it will require leadership. And it will require more than the federal government saying, we don't make decisions about this, we just provide the Medicare app. And it will require state governments to make hard decisions about this stuff and communicate why they've made those decisions. think the Australian public have shown that they're very much on board with the idea that,

sure, you're free to make your own choices, but when it messes with other people, it's going to come at some kind of cost to you. Yeah, I mean, to my mind, I think where we stand today, there are still significant uncertainties, right? There are all sorts of things that we just don't know going forward how they're going to pan out. So one issue is this waning efficacy issue that we're seeing in Israel, right? So the other issue is the development of new variants, right? We've got this Delta variant, which is twice as infectious as the wild type original variant. And that's completely changed the game right that as much as vaccines have

changed the game the delta variant has also changed the game in the other direction so we we don't know about sterilizing immunity we don't know the degree to which we're going to be able to keep on top of these variants whether whether vaccine resistant variants will emerge right there's there's just a huge number of uncertainties today. So, you know, there's all sorts of things that I'm worried about, put it that way. But what I would say is I think the biggest barrier today is actually a psychological one. So, you know, Australia has done incredibly well through the pandemic. Fewer than a thousand Australians have died from COVID-19, purely by, I mean eventually going to be in a position where coronavirus, this special coronavirus, is endemic and we have broad vaccination coverage, but everyone probably

at some point will get it. We'll have vaccination coverage, so you probably almost certainly won't die from it, but some people will die, right? There will be people in future who are double vaccinated and still will die from COVID-19. And in fact, you know, we've had something like 700 deaths per year so far in the pandemic due to COVID-19. Going forward, like if I think five years down the track, I think annual deaths due to COVID-19 will actually be, in all likelihood, greater than 700 per year, right? Where, you know, they could be significantly greater. They could be in the realm of, you know, 2,000 to 5,000 per year, right?

If we were to have really broad-ranging freedoms and broad vaccinations. there's a massive psychological barrier in getting Australians to understand that the last 18 months has been probably unrealistic in terms of the kind of safety that we can expect. Our obsession with case numbers, for example, is something that is going to have to go away in the next few years. And how we get from here to there, I don't know, right? So it's going to be difficult. I like the Prime Minister's four-phase plan because it does explicitly commit to doing that. But you can already see resistance from premiers to start to think about COVID differently. So I sort of think of that as a pretty significant barrier. And I'm not entirely sure today how that will play out. I want to finish by asking you both to reflect on two themes. We've touched on them throughout

the conversation, but I want to turn to them directly. Number one, I'm very bullish on federalism. I'm naturally a big fan of localism, fractalism, subsidiarity, the devolution of power. How, if at all, has the experience of the pandemic and government's handling of the pandemic caused you to update your priors about Australian federalism? I think it, for me, the lens through which I always see this is sort of twofold. I see it as the debates among the framers of the American constitution, where there was a great battle between people who wanted basically a lot of local governance and people who wanted a strong federal government. And I think what those debates showed, and you know, full disclosure, I'm certainly more of a Hamiltonian in that debate. But I think what those

debates showed was there are some issues where, you know, local control is really valuable. And there are some issues where a strong national government is incredibly important and you want to strike the appropriate balance between those two things. The American constitution strikes one balance between those two things and for a long time,

that's worked reasonably well in the United States, but certainly not perfectly and there's certainly fractured to a degree. I think in the Australian context, what it's really shown to me is that we still have some sort of very odd allocation of effective control over things. So, you know, local information, you know, Hayek gets a bad name for things like the road to serfdom and things like that,

but, you know, Hayek wrote an extraordinary paper in the American Economic Review in 1945 where he introduced two concepts one that people remember that paper for if they've read it which is the idea that the price mechanism is really powerful in communicating and aggregating information and the second was the idea that you want to give authority in an organisation to people who have local knowledge. And that local knowledge can be broadly interpreted as just not what's going on, but the ability to act on it. And so, you know, when Steve was earlier talking about how, you know, the states are good, you know, the states run the healthcare system for it. They don't pay for all of it, but they run the hospitals.

So the states were always going to have to play an important role in getting jabs into arms, right? And I think through both good and bad, the pandemic has kind of shown the strengths of our federalism in Australia, and that actually we do have pretty strong state governments, stronger state governments than I think many people thought we had, and that a whole lot of people in certain newspapers bemoan the fact that, you know, where does Dan Andrews and Gladys Berejiklian, where do they get the temerity to actually, you know, exercise the powers that they legitimately hold? But I think there's sort of blame shifting stuff that's gone on has been the most disappointing part of our federalism. So, you know, we talked about that when it comes to quarantine, there was a lot of finger pointing and a lot of discussion about

whose responsibility it was. And nobody had actually picked up some equipment to start building a quarantine facility. There was just bickering about whose job it was. And there's been quite a bit of that. And I think there's been a long debate about the need to deal with things like vertical fiscal imbalance, the sort of financial flows between the states. But what this shows, I think, is that there's still a degree of the right powers not being allocated in our federation to the right places. But it may be better than we thought it was in certain respects. Yeah, so I agree. I think it's, I mean, well, I'm Hamilton, I'm more of a Jeffersonian, but I don't want to go too much. That's one area we disagree on, Rich.

So I love federalism, and I love it for many reasons. One is this local control issue, but an important issue is this idea of laboratories of democracy, right? Which is a, you know, the the idea is brandeisian view yeah you don't get equally bad outcomes or equally good outcomes you get a diversity of outcomes and if different states are free to do different things they'll experiment and other states can learn from that moreover you know there's obviously the the sort of uh t-boo kind of idea of saying well different states can tailor their approaches to the preferences of different people now the great

people of western australia who i love very much i was just there for the new years um they love their hermit kingdom right so we shouldn't we shouldn't begrudge them you know seceding from australia if they want to do it they should feel free to do it, right? I mean, and so I kind of, I really do think the pandemic has been a showcase of the values of federalism. And again, this notion that the federal government is somehow a panacea for every single problem is just absurd, right? And we should recognize that in all sorts of circumstances, the states probably would do a better job. Now, the only thing I would say is there are circumstances where federal coordination and federal control is really, really important, right? So when there's significant spillovers across states, right, where one state can negatively affect another, where different states have different

abilities to raise revenue, right? There's an insurance aspect to having a federal system, a financial system between states. So there's all sorts of roles that are important. And there's all sorts of things that the federal government could and should have done well, right? So we shouldn't pretend that we could just eliminate the federal government. But to my mind, the pandemic has raised the status of the state governments, and I hope that they stay that way. Let me just inject one more piece into that, because you both picked up on the idea of democratic experimentalism. And I think Steve is right. And I think, you know, others who've said this were right, that, you know, America is a great democratic laboratory,

because there are 50 states, and there is great diversity. And so democratic experimentalism can work really well. And I think that recognition of same sex relationships and same sex marriage in the United States would not have happened. It happened too slowly in my own personal view, but it would not have happened as fast as it did if places like Vermont had not been able to push the existing boundaries on that some time ago and show that the sky wouldn't fall in if you gave some significant portion of the population their fundamental human rights. And so we don't have as much scope for that in Australia.

We just don't have as many jurisdictions. I'm not saying we need to break Australia up into 50 states or anything like that. But I think it is a limitation of our federation, which is at least if you take the existing jurisdictions as given, there's only so much experimentalism that can really go on and you know you only get so many data points from that so sure yeah Queensland might do something a bit different and you know Victorians have a different take on some social and economic issues than other parts of the country but there's really not a lot of data points in these experiments and I don't have a good answer to that but Joe I know a lot of scholars listen to your podcast. One thing that I think Australian political scientists,

I would at least benefit from hearing their thoughts on over the coming years, is how we can basically foster and bolster democratic experimentalism in Australia. Final theme that I'll ask you to reflect on, and indeed the final question of this conversation, which I have thoroughly enjoyed as many of us identified at the beginning of last year this pandemic has sadly become a defining event of our lifetimes and it was a time in which we wished for inspiring and effective wartime efforts on the part of our governments and, as has been amply highlighted throughout the course of this conversation, citizens were met with a litany of failures on the part of their governments.

Should we view the bungling of the vaccine rollout and the other errors we've discussed as somehow part of what venture capitalist Marc Andreessen has referred to as the chronic collapse of state capacity virtually everywhere in our time. And if so, what's underpinning this chronic collapse? Do you want to go first, Steve? No, I want you to go first. Yeah, fair enough. I would too. Look, I think Andreessen overstates that a bit. He's a very thoughtful person and I've heard some of his reasons behind that. I'm not so sure about that. I think in the Australian context, you know, one can always hope for great leadership, but probably events make the leader as much as the leader makes events when it comes to those kinds of things. And I think, you know, we don't expect and can't expect kind of Lincoln-like leadership or FDR-like leadership or Hawke-like leadership or John Howard-like leadership, although John, who was a very good prime minister,

was maybe slightly less inspiring than FDR or Lincoln. But, you know, I think we can demand competence. And that's what really, frankly, upsets me, is that I don't expect the Federal Health Minister to, you know, to be Bill Clinton, or FDR, or Lincoln, but I expect them to be competent. And when that doesn't happen, I think people have a real right to be upset. So is there a secular decline in the competence of government? I'd like to think not. But, you know, maybe if things were a little less politicised, and we judge people a little bit less through partisan lenses, and just through the idea that, you know, if you're a Labor voter, sometimes Liberal Party does good things. Sometimes even

the National Party does good things. And if you're a Liberal or National voter, you know, maybe Chris Bowen's got something useful to say and we should all listen to it. And so I would like to think that by being a little bit less partisan, we could provide better incentives for at least competent leadership. And then every now and then we'll get lucky and we'll have a great leader. Yeah. So that wasn't enough time for me to figure out an answer, but let me do it on the fly, which is, um, I think, look, Scott Morrison is kind of the Stephen Bradbury of Australian politics, right? I mean, no one ever, no, he didn't. I mean, I'm sure he didn't ever expect to be prime minister when he became prime minister and, you know, going into the pandemic, I didn't know much of him.

I didn't, I didn't have particularly positive or negative views. You know, I was fairly neutral. And early days in the pandemic, what he showed, I think, which I was surprised by and impressed by, was a willingness to very quickly change course when things weren't working. So there was a three-week period in March 2020 where the fiscal support package increased by an order of magnitude. So one week there was some really minor measures. We all thought, what the hell, that's not enough. So they came back the next week with a much bigger set of measures and we thought, that's not enough. And then he came back the next week with a much bigger set of measures,

which finally seemed to be up to the task. His willingness to very quickly recognize how to change tack, and I think frankly at that time how to change tack to his political advantage, right, I think that was a significant part of it, right, was something I thought we should actually feel quite glad about and lucky for you know that's that the last thing you would want in those circumstances is some really stubborn leader who just won't change tack no matter what right so that was great and and that actually

served us pretty well and even recently right um with the vaccine rollout, as frankly disastrous as it has been, they have shown an unwillingness to, I mean, everything that Richard and I have ever recommended in our 11 or 12 opinion pieces, basically is now government policy, right? So they have done things to try and respond to circumstances. So that's, I think, good. And that's kind of the optimistic take about the functioning of our federal government at this time. The thing that I would say, though, is I think that what I'm really disappointed and sort of despair about is the system that we have, certainly at the federal level, and the lack of incentives that that system generates for people from diverse backgrounds, but who are the leaders of their respective fields to decide to enter the political kind of contest, right?

So there are so many disincentives for really top quality people to go into politics and so long as those disincentives remain i think the quality of our polity will be sort of maybe secularly deficient right so i i i don't know and it's easy to look through rose-colored glasses back at the 80s you know as this golden era but my sense is that in past, we were able to attract a higher caliber of individual into politics. And so my goal, I guess, if I was designing our political system, would be to gear the incentives

as much as we can towards maximizing talent and hope that that maximizes the potential for the right people to be in the right places when the hard decisions have to be made exactly how to do that that's probably a whole other podcast steve richard thank you for your time i also want to take this opportunity to thank you both for your national service in speaking up so cogently and consistently to move the the national conversation about our handling of the pandemic in a better direction. So thank you both.

Thanks, Joe. You're welcome. Thank you so much for listening. I hope you enjoyed that conversation as much as I did. For links, show notes, and the transcript, head to my website, thejspod.com. Until next time, thank you again for listening. Take care. Ciao.