Megan McArdle's Best Post Ever

Megan McArdle is an interesting writer, but I think she gets a solid "D" for her ability to describe herself, ala "Jane Galt".

For just one additional example, she recently proposed large adjustments to Federal gas taxes in order to encourage/force people to live in cities rather than to live in the country, by intentionally making their current way of life too expensive for them to maintain.

I would not describe any person with a penchant for directing the lives of others through the hand of a central government as a libertarian.

I'm much less worried about this than I should be, but I kind of expect new ways of ramping up the human immune system will play a large role in replacing anti biotics. That doesn't mean we shouldn't look at the role of regulations.

Megan might have pulled her punches because I'm not sure her self-identifying as a Libertarian is accurate. After all, she said she'd have voted for Obama if she had registered to vote. My idea of a modern Libertarian is someone who wants government to be involved only as a last resort. Obama throughout his life has been on the government-is-the-answer end of the political spectrum. I'd be curious how Megan squares that circle. Maybe she's a libertarian on social issues and not fiscal issues - but when I read her blog, she seems to want economic freedom, too!

"I don't get why Megan, a self-described libertarian, 'beltwayed' it, that is, stopped short of calling for eliminating or even modifying the regulations on testing that are contributing to the problem. She laid out a problem beautifully, just as in her Kansas City talk, but then pulled her punches when it came to calling for deregulation, just as in her Kansas City talk."

I noticed she also stopped short of calling for new regulations limiting the usage of antiobiotics for frivolous tasks, or for a tax on antiobiotics that rises as the probem becomes more severe. My guess is testing regulations are only a minor part of the problem, and what are we supposed to do once we run out of things to deregulate and the problem keeps getting worse as we should expect it to?

It's possible to be a libertarian, and think that in this case deregulation would make the problem worse, not better. Antibiotic use is a near-perfect tragedy of the commons case (moreso I think than the original story behind the tragedy of the commons).

While I think that loosening regulatory hurdles to drug development will help a bit, it will not come close to solving the problem. At the rate we're going, we need a new methicillin or vancomyacin every year or two, and no matter how deregulated we get, the chemistry is not there to let us keep up.

I support deregulation, but if you asked me to offer up suggestions to counter the antibiotic-resistance problem, I would not even put in my top 5.

Readers who are more interested in the antibiotic issue should look at Kevin Outterson's response to Megan with with more detailed analysis, available in this post.

I was a medic in the Army over at Fort Bragg. We invented MRSA if I am not mistaken. There is a scar on my leg where a MRSA infection was cut out. The thing is that if a bacteria is MRSA then you still have other anti biotics to treat it with. If you have a VRSA bug, well then you can use Vanco.
Bacteria are not the borg from star trek. They can be treated the overwhelming majority of the time. If a few strains get crazy and are hard to treat there will always be some smart team willing to find a way to cure it, i promise.
Do not support crazy restrictions on anti-biotics because they do not really do a good job of making sure people take them properly. The restrictions just ensure that no one can get them. This question is no different than government control on anything

I generally expect economists to be immune from "the sky is falling" type logic, so I'm a tad confused as to why this is such a huge deal.

Is it not safe to assume:

1) As effectiveness of existing antibiotics declines, demand for new antibiotics will rise.

2) As demand for new antibiotics rises, consumers will pressure politicians and regulators to relax approval standards. (If standards are not relaxed, demand will continue to grow, and pressure on politicians and regulators will increase)

3) In the absence of stringent regulation, high demand for new antibiotics will create strong incentive to develop new antibiotics or substitutes. (If new antibiotics or substitutes are not developed, prices will rise, and incentive to develop new antibiotics or substitutes will increase)

Is this problem really all that different from, say, Peak Oil?

Megan McArdle says:

But anything we do to reduce overusage actually makes the problem of new antibiotic development worse, because it reduces the potential profit. At any rate, there's no clear way to solve this terrible divergence.

I don't understand that.

This seems like a case of an externality whereby excessive use reduces the effectiveness of the antibiotic in other instances going-forward. It also seems like a situation in which a free market would internalize the externality, i.e., drug companies would have an incentive to ensure the long-term effectiveness of their products (by limiting frivolous use) that would balance their incentive to sell as much as possible. In a free market, they would thus have an incentive to maintain prices higher than otherwise to curtail overuse. Put another way, maximizing the profit from drug (as measured by the net present value over the life of the drug) would also be consistent with maximizing the long-term effectiveness of the drug or value of the drug to society. Because the profit incentive would be intact, so would the incentive to develop new drugs.

Isn't that right?

Peter H said:

Antibiotic use is a near-perfect tragedy of the commons case

I don't think so: private property rights can be assigned and enforced. It's more like a "reverse network good" - the more people use it, the less valuable it becomes.