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COVID-19: Insights from Innovation Economists

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investments
covid-19
finance

Innovation economists at the College of Management of Technology have published a report on the COVID-19 crisis. It covers topics such as: why is society investing so little on vaccine research? What roles do patents play in this crisis? How can we assess the short term policy (over)reaction in re-allocating so much funding to this field? And finally what are the lessons for the future?

The present document provides the take of innovation economists on the current pandemic. It is addressed to the general public and focuses on questions related to the Science, Technology, and Innovation (STI) ecosystem. It does not present new research findings. Instead, it provides a reading of current real-world developments using economic reasoning and relying on existing economic research.

The first part of the report explains the root causes for a general underinvestment in Research and Development (R&D), with a particular focus on vaccines. These causes include an insufficient demand for vaccines in normal times and the very characteristics of R&D. Governments can intervene to mitigate these problems, but government intervention comes with its own set of issues. The report discusses three of them, namely free riding, setting research priorities, and acting on scientific knowledge.

Investment, cooperation and patents

The second part discusses several aspects related to current STI policy reactions. First, a sizable shift of funds towards research on SARS-CoV-2 is observed. Aren’t we wasting money by allocating so much of it on one single scientific problem? Using the concept of the ‘elasticity of science,’ the authors argue that we are far from a situation where additional funding would represent a waste of money. Second, they also observe an unprecedented level of cooperation among researchers but also an intense competition to find therapeutic solutions and vaccines. The authors of the report seek to make sense of this apparent antonymy, highlighting how both cooperative and competitive forces might accelerate research.

Third, they focus on one policy tool, namely patents, and they discuss whether the existence of patents hampers the search for a solution. They argue that it might, but they provide ways in which patents can be beneficial. They can accelerate research (such as through patent pools) or ensure greater access to innovations (such as with compulsory licensing).

Fourth, the authors notice that the whole STI ecosystem has been rapidly refocusing on SARS-CoV-2 in a way similar to mission-oriented R&D (MOR) programs such as the Manhattan Project in the 1940s. They highlight the fundamental differences between MOR and the present situation. Today’s response is characterized by a proliferation of a wide range of innovative solutions offered by a complex set of institutions and actors with great intellectual freedom and decentralized competition.

Long-term impacts

The third part of the report assesses some potential long-term impacts of the COVID-19 pandemic. They firstly discuss its impact on R&D investment. They explain how innovation might be negatively affected by a prolonged economic downturn and highlight the crucial role of stimulus packages in confronting the recession. They also address the influence of the crisis on ICT, arguing that it has been a formidable catalyst for ICT adoption.

Next, the authors focus on clean technologies, another major societal challenge besides the pandemic. There are strong reasons for why cleantech investment may suffer. However, the crisis also offers significant opportunities to accelerate the green transition.

Finally, they focus on open science, in particular on open access and open data. The current crisis could be a catalyst for the adoption of FAIR (Findable, Accessible, Interoperable, and Reusable) Data Practices.

«The pandemic offers a unique opportunity to adapt the set of rules that govern our society.»

Prevent outbreaks

The last part of the report offers some concluding thoughts. The STI policy response cannot be limited to the urgent need for ‘technological fixes.’ A second line of response involves the production of new knowledge to prevent outbreaks (ex-ante) or mitigate their effects (ex-post).

Furthermore, the current crisis is a reminder that all branches of science matter. The pandemic has many facets, and a significant number of scientific disciplines can contribute to dealing with it.

The authors conclude with a forward-looking note, arguing that the most substantial impact of the pandemic may lie outside of the public health realm or the science system. It offers a unique opportunity to adapt the set of rules that govern our society.

Read the report.

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