Making Markets for Merit Goods

Making Markets for Merit Goods
with Ethan Kapstein

This is from a blog post at the Center for Global Development about a new working paper available at CGD. Sorry it’s been so long for me to post here again, but I hope to channel a few new pieces here periodically.

Our research on the political economy of antiretrovirals (ARVs) is motivated by a key puzzle: why were AIDS activists and AIDS policy entrepreneurs successful in putting universal access to treatment on the international agenda when so many other global campaigns–whether in health care or other issue areas like climate change–have either failed or struggled to have much impact. In our paper, we make the case that the market for ARVs was politically constructed, meaning that activists had to bring the demand and supply sides of the market together through a variety of tactics and strategies (Tim Bartley makes a similar argument on forest certification schemes).

Merit Goods and Market Failures. The idea that motivated the activists was that AIDS drugs should ideally be “merit goods,” meaning goods that are available to everyone regardless of income. However, when ARVs first came on the market, poor people in the developing world lacked the financial resources to buy the drugs, which were exceedingly expensive. AIDS activists successfully lobbied donor nations to use foreign aid to buy the drugs, and they pressured pharmaceutical companies to lower their prices, while encouraging generic firms to enter the market which had an even bigger impact on affordability.

How did these developments evolve into the universal access to treatment regime? We focus on three factors in this piece:

Permissive Material Conditions. The success of this strategy was ultimately conditional upon permissive material conditions—falling ARV prices, increases in foreign aid, and a growing global economy. However, these favorable material conditions were not enough.

A Compelling Moral Argument. The effort to extend treatment would not have happened without a compelling moral argument, which helped build broad political support for the policy.

Convergence on a Prescription. Finally, activists were fortunate to converge on a single policy in the treatment arena. AIDS prevention policies, by contrast, have been much more politically contested and suffered accordingly (see Jeremy Shiffman’s CGD working paper for a similar argument).

Looking ahead, we worry the lack of success in AIDS prevention may compromise the treatment regime’s long-term trajectory (see Mead Over’s CGD paper for expression of similar concerns).

Lessons for Other Campaigns. We believe that activists who focus on other issue-areas, again whether in the health care space or in other domains, could learn something of importance from our research. The basic difficulty and costs of certain policies may make some problems harder to solve than others. Even where a policy enjoys favorable material conditions—low costs, large benefits, demonstrated feasibility—this may not be enough. A clear prescription and a resonant moral argument may be necessary for an issue to receive adequate political support.

Be Sociable, Share!

Comments are closed.