The Race That Stopped The Nation — Richard Holden & Steven Hamilton (#137)

Richard Holden is Professor of Economics at UNSW. Steven Hamilton is an Assistant Professor of Economics at The George Washington University.

Transcript

JOE WALKER: Richard Holden, Steve Hamilton, welcome back to The Jolly Swagman Podcast. 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 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.

[10:56] But first I’d like to start by summarising 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.

RICHARD HOLDEN: 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 wanted to get that on the record.

WALKER: That’s the real race.

HOLDEN: So what happened in March last year? Well, at a time when we had three deaths and about 80-odd cases in Australia, there was this question of what we were 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 rating of things is that Gladys Berejiklian and Dan Andrews put their foot down. And pretty soon after that 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 contract 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’re in a much better place to deal with the pandemic with much more minimal restrictions than we saw our overseas precisely because we didn’t get out of control early on.

STEVEN HAMILTON: 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. In mid-March 2020, I was in Washington. I wasn’t thinking about Australia at all at that point. I was thinking about the US and I was one of the first people in mid-March to really loudly call out this notion that the whole economy was about to switch off for… 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, I was on with Chris Edmond last year, the need for economic supports and in particular, in my case, advocating for small business support.

To help businesses through where stimulus wouldn’t normally get through to them because we have kind of frozen the economy. So I talked a lot about that around this time, but in mid-March, 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 and 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 there were four of us economists: Richard, myself, Bruce Preston, and Chris Edmond 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 lockdown 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. 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, the fact that the US never took the lesson from Italy, right? Like US looked at Europe and thought, well, that’ll never be us.

And Australia didn’t make that mistake. Australia was probably a few weeks behind the US, but what we did that US didn’t is we took those lessons. 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 journalists saying, “Australia and all its restrictions” when more than 600,000 Americans are dead and fewer than a thousand Australians are dead. So all you have to look at is the outcome to see how well we’ve managed the pandemic.

WALKER: 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 criticise particular aspects of the response in a vacuum like “lockdowns cause economic damage.” But the argument from folks like yourself and Richard was that, if we locked 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.

HAMILTON: Yes. As critical as Richard and I have been of the vaccine rollout, which we’ll surely get into detail on, we can’t underestimate just how complex this problem is. It’s incredibly complex. It’s unprecedented. As much as we should have seen it coming, you kind of 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, again, as much as we’ve criticised 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 kinds of problems. And on that basis, overall, I think, you cannot complain about the response I would say.

WALKER: 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. So much so that it’s caused folks like Tyler Cowen to say that it might be 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 percentage of the population needs to be vaccinated, how we come to that calculation. So just some basics around like vaccination.

HOLDEN: 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 sort of want to look at what things in the last 100 years have like 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. That’s going to lead to a whole lot of people getting very sick, a whole lot of people dying from virus, like the one we’re facing and have been facing last year and 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. It sort of has two connotations. One is the sort of the 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 are 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 right at 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 needs 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 around 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, you 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.

WALKER: How do you think about the emergence of mutant variants and the prospect of a rolling revaccinations dragging on indefinitely?

HOLDEN: Well, I think you pointed out that the original mRNA vaccine who have developed basically in a weekend, so that’s one thing that goes fantastically in our favour which is: if there is a variant that current vaccines would not protect us against, there is 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’re 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, that 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 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 — 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, 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, mine are more frequent because I usually step on a rusty nail more than once every 10 years I have to go and get another one. So we’re used to doing this. We’re not used to doing it on 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.

HAMILTON: 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. Richard and I, if you read our pieces, we’ve written, I think, 11 or 12 pieces since January, have updated our priors when new data has become available. We don’t have perfect clarity about exactly how these vaccines work in terms of their performance, whether they wane or don’t wane, what the effectiveness of boosters is, all of this stuff is still quite uncertain. So, we are in a world where, when we think about policy advice, we do need to think under uncertainty.

So for example, there’s some data emerging, as Richard alluded to that perhaps while AstraZeneca starts off at a lower efficacy than the MRNA vaccines, that efficacy may have more resilience. But because it’s so new, we just don’t know yet. We’ve only reached the point where they’re roughly the same efficacy after six months, but how they’ll be beyond that is unknown. And we don’t know whether these vaccines can provide what they call sterilising immunity, that is, like the chicken pox or something, just permanent immunity forever, like there is no virus in your system. So all of this is still quite uncertain. So when we’re designing policy, we need to think about 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.

And we do see new variants emerging. So it makes sense to get ahead of that curve. And you see the US has begun to do this, which is, move the boosters just in case. Even if we didn’t have waning immunity, do it just in case. 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 adding to what Richard said before, is there’s really two parts to the vaccine. One is dealing with infection, so preventing infection and preventing transmission of the virus. But then the second part is minimising the thing we really care about, which is death.

And maybe severe hospitalisation and death, perhaps severe illness. So at the end of the day, if everyone got COVID, but no one got severely ill or died, we wouldn’t care about COVID. We just wouldn’t talk about it. It wouldn’t be a thing. The reason we care about it so much is because millions of people have been killed. So we only want to minimise spread, minimise transmission, minimise infection, because we’re trying to minimise the end result, which is severe illness or death.

So let’s just say, hypothetically, if the vaccines were a hundred percent effective against severe illness and death, but they still allowed significant transmission, we wouldn’t care so much. 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, a lot of commentators, including us, have focused a little bit more on illness and death than on transmission, because that’s the last sort of beachhead, if you will.

It’s the last line of defence. 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. 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, severe illness and death.

WALKER: 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. What are all the steps that happen through that process from government regulators approving the vaccine to governments, procuring it and distributing it? Could you give us an overview of that process?

HAMILTON: 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, we’re not public health experts in the sense of being doctors or immunologists. We aren’t right. We are economists. But so much of the vaccine process, from the thing that you’re describing, from the very inception to achieving some kind of a broad coverage, is actually an economic problem rather than a medical one. Because so many of those steps that you described and some that you didn’t are really about other things like, investment decisions, how to build the factories and scale and distribution channels, how to provide incentives, how to, again, procure vaccines.

How to think about this as an insurance problem, rather than a kind of medical one. So 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 that actually significantly this is an economic problem. And, frankly, in my opinion, 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 in economics that looks at how to give vaccine designers, like people at BioNTech and Moderna the incentive to invest in what is a very risky thing.

So if you look at vaccines in general, a lot of them don’t work. And even in the pandemic, as you described at the beginning, as amazingly successful as the vaccine development process has been, there are, for every successful vaccine, there’s like 10 on successful vaccines. 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, which had this issue of , false positive HIV test results and therefore never made it. I think it never made it even into the stage three trial phase.

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, the true economic value of these vaccines, putting aside the kind of human intangible value, is genuinely in trillions of dollars.

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. We should put every dollar into every vaccine that we can even conceivably consider and not even worry about whether that’s going to succeed or not. And so, 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. You can think of it just like insurance. But, the idea is to minimise the risk to encourage the development of the vaccine. In the US there was operation warp speed, which basically did this: advance commitments for the vaccines way back in like June 2020.

And that kind of encouraged 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. So what in the end looks like a no-brainer — we poured a few billion dollars in at the front end and got a few trillion dollars in at the backend — it needed that kind of careful design and, again, that kind of economic thinking upfront to ensure that it would actually happen. So Richard might want to comment on other aspects of the development process, but to me securing advanced commitments at the very earliest stages, I think was really essential to get a lot of these off the ground.

HOLDEN: I think that’s exactly right. And Steve picks up nicely on the point that 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, a tempting to answer your question, Joe, is to say, “Well, there are three phases of trial 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’re all really important steps in the process. And, we don’t want vaccines that 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 somebodies arm.

But it’s really important to think about the economic incentives for people to do that. 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-ride 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 $2 billion into it and it succeeds, and it might make me $10 billion, and then I can’t make $10 billion off it because somebody who 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 that 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 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 investment to get those innovations to occur.

HAMILTON: If we look at what actually happened… I mean, it’s a miracle, it’s amazing, but I wonder if we looked at how many doses…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. So, whereas each dose of AstraZeneca is worth maybe what $4 to $5? Each dose of the mRNA is more expensive, maybe $20 (this is USD), that cost-benefit analysis is absolutely passed for every person on earth. If you were, if you’re a world-planner, where you got to decide 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.

And yet, in terms of production capacity, even a year after we started almost… Well, actually, the manufacturing started a year ago… We haven’t even covered a fraction of the earth. And certainly we’re seeing that in Australia. We’re so much further behind the curve in terms of supply. So 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, it’s pretty clear to me at least, there’s probably a significant under-investment in production capacity globally, compared to what would have passed like a global cost-benefit analysis.

So, there was a big discussion, and it’s not resolved, but there was a big discussion about whether these supply constraints that have limited vaccine production are real or is it just that the supply curve slopes up? 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 in our planning process? And it’s hard for me to believe that that isn’t the case. I do think that in various ways we as a globe, we definitely under-supplied vaccines compared to what we could have done.

WALKER: So assuming the vaccine rollout is a race, and I mean, I know it’s not but just assuming for a moment, it is.

[Laughter]

HAMILTON: It’s the race against the virus, Joe, it’s a race against the virus.

WALKER: Yes. Well, that was 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 said Steve? Like what’s the yard stick in this race?

HOLDEN: So I think that all of those things are relevant, which is, when we’re coming last or second last or third last relative to OECD countries, something’s going wrong. When we’re not acting with a sense of urgency, and so whether it was Brendan Murphy or Scott Morrison or Greg Hunt saying it’s not a race when 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.”

HAMILTON:

Richard, I’m not that’s true. I’m not sure everyone understood that earlier this year, to be honest. 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 now I’ll just speak for myself: at least to me, Australia has an incredibly competent administrative state. So I spent about a decade living in the US, Steve still lives in the US. 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 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 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 and 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. You know, 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 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 Mexico or New Zealand? 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.

HAMILTON: 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, 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 policy apparatus, it was asking very unusual things. 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. Usually they’ve got a vaccine coming across the desk and they go, “Pretty simple cost-benefit analysis, we’re going to weigh the public health risks against the kind of benefits of this, which are considerable, but limited.”

And , think, “Well, the cost of this vaccine is X, the benefit’s 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, because the benefit of a vaccine that cost $20 is ten to a hundred times more than that. The cost-benefit analysis is so extreme, as Alex Tabarrok said: the world’s easiest cost-benefit analysis because trillions is more than billions.

When you’re dealing with order of magnitudes, this normal process is just not equipped. And moreover, 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 “Why spend ten billion when you can spend two?”

HOLDEN: And just reflect on that for a minute. I think Steve’s point about ordinary times, understanding what times we’re in, is super important. In ordinary times, somebody who’s in charge of purchasing 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 insight, so that’s great news. That means that some other life-saving drug can get put on the PBS and that’s going to save people’s lives. And so you might think purchasing is kind of a boring job — it’s super important. And I can understand, people who are 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 and say “Trillions: thousand times more than billions.” Has to sit back and say, “Hang on a minute, if we overpay, ‘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, 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, the idea that our 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 why you 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 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.

HAMILTON: 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, we should have been willing… 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, if we were going, “Oh boy, ordering a duplicate set of vaccines — that might cost another billion dollars.” If anyone even asked that, they had no business doing so. 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 they’d originally ordered, I just don’t believe you. At some point that was on the table, because other countries got access to it. So at some point someone had to say no. 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 Halton or Brendan Murphy, but someone said, “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. But 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 kind of the prime reason we’re in this situation we’re in, and again, not something the public service, even the cabinet process, is used to contemplating.

WALKER: Just to drive this point home, Richard explained the concept of option value.

HOLDEN: Let’s just go to what an option is, right? So an option is a financial instrument. And it’s 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 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 how long that option is good for. So for the next six months, I can buy the option and it’ll have a strike price. It says 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’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 out. 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 and 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 is a perfect example. If you’ve got a forward 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. Instead, 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.

WALKER: So in contravention of that principle, of that approach, in the initial procurement strategy, the 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 & Johnson. In the protein vaccines bucket. They picked Novavax over Sanofi. 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 affect?

HOLDEN: While Steve is chuckling, I’m going to put a couple of ideas on the table and then he can pick. So there’s a couple of things, right? One is the sort of cultural cringe about Oxford University and this is why we kind of have, I think, overblown, respect for Rhodes Scholars in this country. 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. So why is that good? The reason that’s good is it protects you against the so-called hold-up problem, which economists like me worry about a lot, which is, 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, is 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, 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 or 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 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 quarantines for people, have good quarantine for people. So I think with the vaccines there was a lot of competing objectives, some of which I think were legitimate and some I think were misguided.

HAMILTON: Let me add two things. One, clearly I think we had a bit of an obsession with home grown stuff. So the big horse that we backed was UQ because it was the Aussie one.

WALKER: It’s almost like Dick Smith was in charge of the procurement strategy.

HAMILTON: 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. So we backed UQ. And then we backed the second horse which was AstraZeneca, which is the closest thing to Australian is British. And so we’ll go with the British one and yes, okay, we can make the British one on shore. So there was this huge focus on domestic development, domestic production, which as Richard said, 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 had contracted with AstraZeneca for those doses, including Australia. So, 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.

So this notion that we need to choose is just a totally false notion. There was no reason to say, why did we pick this one, versus… just pick them all. Order Johnson & Johnson, order AstraZeneca, order Moderna, 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. And it’s worth noting one other thing, I’ll pick up on a point that I made before, which is, when we were advocating this, in December, January, this idea of major overlap, redundancy in the vaccine policy, a lot of people said we don’t need them. Other countries need them more. 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, 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 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. 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 materialise a production facility out of nowhere, you kind of needed to do that a year ago. So I think there’s this idea that there was a choice that, one, Australia ordering it would have taken it from countries more in need, and two, the fact that there was a limited supply, I think, is a myth. So in practice, I think there was really nothing stopping us from generating this kind of redundancy. And at the very least, if we had got all of those additional doses, we could have given them to our neighbours.

WALKER: Yep. Send them all to Indonesia. The returns on something like that for our relationship and security would have been huge. 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?

HOLDEN: Not enough people taking first year university economics would probably be the first thing. I guarantee you, anyone who had 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 most 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 a very wide range of people across the political spectrum, is that there’s really been a systematic 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 Hawke 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 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 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. You can shuffle some papers around, but please don’t think too hard about things.

And 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.

HAMILTON: 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, well 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 Steven Kennedy, the treasury secretary have shown throughout the pandemic that they understand this. 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.

They spent a hundred billion dollars on a wage subsidy scheme of all things. 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 in terms of wasted human capacity in unemployment and human suffering, frankly. 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.” I don’t know, I don’t have visibility into exactly how this went down, but one possibility is that they was just incredible silo-ing in the cabinet, 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.

Again, we don’t know, we don’t see, but it’s difficult for me to believe that Steven Kennedy, who’s a truly brilliant person, and is able to 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 cabinet process to prevent kind of a broader voicing, a broader kind of consideration of these concerns.

WALKER: If that is true, Steve, it’s almost an example of this “economists should stay out of health decisions” kind of thinking, writ large.

HAMILTON: Yes. I mean, and boy, again, how much harassment, Richard, have you and I received by people saying, “Oh, what would you two bloody know about vaccines?” Every time we have to remind people that it could be dog food. 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 a medical problem, and frankly, doctors have literally no idea about procurement questions, 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. That will be prevented, no doubt, but 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 good example of what you just described was ATAGI, right? ATAGI, 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, health doesn’t appear in that acronym. It’s a technical advisory group on immunisations. The fact that the technical advisory group on immunisations doesn’t contain any economists, is absolutely nuts, and yet here we are. 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.

I think I started tweeting about it in December, and even that was quite late. I think, 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 radically improved the position we now find ourselves in.

WALKER: That’s procurement. What about distribution? How does the distribution piece rank against the bungling of the procurement?

HOLDEN: 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. My reading of the situation again, and 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 learnt 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 rollout well, they would’ve got the credit for it. It looked like a classic example of, “Well, this looks like something that will look very good for our reelection 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. We’ll cut a 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 off it. This was going to be free. Well, if you say to a GP, they’ve taken an oath to take care of people, and you say, “Well, you 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.” There’s going to be pushback about that, right? They want to help out, but there’s going to be pushback about that. 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.

Again, really early on, when the health minister was saying, “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 people were just 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.

As soon as the state governments got some authority to do these things, Gladys Berejiklian and her team managed to spin up a mass vaccination hub at Sydney Olympic Park, and obviously there’s been several others elsewhere since then, but they spun that thing up in a matter of days, basically, and it’s been incredibly effective. 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 suffered 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 if we don’t do X? What else will happen?” Those are just really basic matters of logic.

HAMILTON: 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? It was sort of like, well, in a sense, if we’d had mass vaccination hubs in February, they would’ve sat empty, because we didn’t have a massive amount of vaccinations to deliver. But certainly you should think about this as in a state of uncertainty where, well, suppose the UQ vaccine had worked, and suppose we didn’t have all the issues with AstraZeneca production, and importing, and then the clotting issue that caused a lot of limits and apprehension. If we didn’t have all of those things, we would have maybe, if everything had gone right, had enough doses, and then we would have seen the distribution channels really not be up to the task.

I think, yeah, as Richard said, a radical over-reliance on GPs, which is… 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, the public health apparatus. But the second issue is, 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’s political incentives to do that.

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. 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.

[1:12:52] WALKER: Let me play devil’s advocate and then get your reactions. 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 realised, switch to the more effective vaccine. Reactions?

HOLDEN: We’ve imposed a bunch of artificial constraints on the problem, but they’re worth going through. I think the core one there was as you said, it’s basically difficult to have two vaccines, because people are always going to compare them. You correct me if I’m wrong, but I think that was implicit in your statement. I think there’s a degree of truth in that, but I’m not sure that’s the sort of primary consideration. I think the other thing that comes on with all of this, is there’s the ability to mix and match vaccines that has overseas actually proven to be even better. Canada’s an example of this, and there are others where mixing and matching between different types of vaccines can be very effective.

HAMILTON: We’re the ones that won’t allow it.

HOLDEN: But if you have a regulator that allows it, turns out you can do that. If you have our regulator, not so much. The other thing is, the sort of booster shot stuff. Imagine we had been in a situation where information had come in, we’re sitting on a whole bunch of Pfizer, or a whole bunch of Moderna, and a whole bunch of AstraZeneca, and we say, “Actually, I 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 said 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…” Obviously, there are different refrigeration requirements for these things. Maybe, certain regional areas might’ve had some, others might’ve had others.

I think, the sort of vaccine equity within Australia, there’s the international dimensions which were 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’s unfair, it’s just a very natural feeling for people to have. “Listen, I’ve put up a lot with this, and 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 the best vaccine that I could possibly be getting.”

I think that’s really a big part of where the messaging campaign could have done a much better job. I think if the mindset people had 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 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… Oh, you don’t have to take AstraZeneca now.” What happens? Bookings for AstraZeneca canceled the second the words come out of his mouth.

I think that people are willing to, particularly Australians, I think, are willing to understand a lot and they’re willing to sacrifice quite a lot, but there’s only so much incompetence that they can put up with, and at some point that’s fair enough.

HAMILTON: Let’s say, 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 and it’s just not a big enough sample in order to draw that issue out. 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 die of COVID, right? Let’s just actually focus on having a pretty good chance of protecting people. Now, if you just look at the stage three trial data, mRNA vaccines look significantly better, significantly more effective against infection compared to AstraZeneca.

I’ve been attacked 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 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 favour mRNA over AstraZeneca, but in practice, the two vaccines are actually similarly effective against sort of hospitalisation 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 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.

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, say this minor small clotting risk. And so we’re seeing, for example, in Sydney, tens of thousands of young city people going to pharmacies and getting AstraZeneca in their arms.

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 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? That the capacity is there, and so regardless of which one wins or which one’s favoured in any given time, that’s no reason to take any of them off the table.

WALKER: 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?

HOLDEN: I think we’ve said a lot at various points in time, including on this podcast.

HAMILTON: All I’ll say is, I think we’re in a good place now. I think, the rate of vaccination in New South Wales is spectacular, and they look to be going really well, and the government is even doing stuff, like going to Poland and saying, “Hey, give us your spare doses.” 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. 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. 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 where the virus isn’t out and about.

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. Imagining that from now to December, everything’s just going to go fine and we don’t need to do anything, I think, is 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. Richard and I have proposed lots of different things. Lots of different methods to incentivise 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.

Again, using any tool, not worrying about the financial consequences, just try it all. Pay people $300? Sure. Give people a lottery ticket? Sure. Vaccine passports. Just throw everything we possibly can at this problem to get that rate up.

WALKER: Vaccines are an important piece of the puzzle. At this point, probably the most important piece, but 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?

HAMILTON: Oh, I mean, it’s so frustrating. I mean, I’m sure many, many people listening to this podcast 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. I went to Nambour Hospital, which is about a 30-minute drive from where I am. I got there and there was a massive queue, and I asked the nurse attending, “How long is the wait?” She said, “Well, the wait is longer than when we close, so you should just come back tomorrow.”

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 could come back tomorrow, and get a test, and find out that I’ve been spreading the virus around all this time. The fact that 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 obviously, both very frustrating and also incredibly dangerous, because we have no idea who has COVID and what they’re doing.

WALKER: 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 specialised facilities? Why are we still allowing COVID to leak out of quarantine facilities? How has that even happened?

HOLDEN: It’s completely bizarre to me. Let’s start with some of the legitimate, the couple of legitimate points about this. We can’t just put those 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. There’s the odd example of that 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 very, very foreseeable, but unfortunate situation with the leaks out of quarantine in Melbourne. When you start using private security for these sorts of things, and those people have multiple jobs, aren’t 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 Bill Gates was telling you, “This is going to happen.” Every doctor who works in infectious diseases says, “No, no, no, no.” They’re 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 you just said like, “Let’s build it. It only costs so much money.” It’s not a dead waste. 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’ve made sense to invest in those facilities. 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. 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?

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. Again, 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. 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. Again, I think it’s just sort of systemic failure on all of these things.

HAMILTON: 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, if things go badly, end very badly for you.

The other thing I would pick up on, on hotel quarantine is there’s a lot of misunderstanding out there, in places like Twitter and among journalists, about whose responsibility it is. 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. Anyone who tells you, for example, the opposition leader, that quarantine is solely a federal responsibility, just has no idea. 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…

HOLDEN: Yeah, I thought that’s where you’re going, Steve.

HAMILTON: The vaccine rollout.

HOLDEN: They dropped everything else they picked up, so I’m not sure.

HAMILTON: 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, 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. I’m sure other states took lessons away from the Victoria failures of hotel quarantine last year to upgrade their facilities.

Having each state do their own thing is actually an opportunity for experimentation in a way that can be really helpful. I just don’t buy these arguments, that this is kind of Scott Morrison’s fault, or some failure of the federal government. I think the states have a lot to answer for on the failings of hotel quarantine. 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, 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 higher vaccination rates, say at least 80% of the population being vaccinated, 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?

HOLDEN: I think both things would have made it a lot better. I don’t think we know exactly whether 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. Whether it’s the quarantine or whether it’s the rules about a limousine driver not wearing a mask and not being vaccinated, I think those are all part of the sort of the quarantine ecosystem, if you like.

Again, it does look, in one sense, like hindsight’s 20/20, so look back and say, “Oh, this one individual caused this thing to happen.”

I mean, it’s a system-wide failure. I mean, you also look back at that and say, who could possibly have put rules in place that, 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 and in the evening, and then go back and do the same thing the next morning that’s just a clear systemic failure.

HAMILTON: 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 roll out, the potential he would have both contracted and then transmitted the disease is significantly lower were he vaccinated. But more importantly, yes, a broader vaccine coverage may have, well, would have for sure, reduced transmission across New South Wales. It would have radically reduced hospitalisations and deaths. So we’re seeing Gladys get up every day and saying, here’s this, low single-digit figure, people dying. Some of whom are in their thirties, none of whom are fully vaccinated.

Virtually none of those people, virtually none, would have died were they vaccinated. So regardless of anything else, 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. 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.

WALKER: So what’s the way forward? What should we be doing that we’re not currently?

HOLDEN: 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 number, there’s a legitimate set of arithmetic questions around 80% of what is it 80% of-

HAMILTON: What’s the denominator.

HOLDEN: Yeah, what’s the denominator, right? So is it 12 year-olds, which is by the way, well above the age at which kids know what a denominator is. So this isn’t a hard set of questions to be answering. 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% number: 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?

And 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 just not that big of a deal. And if that helps, then that’s a good thing to have. Mask mandates for kindergarten kids 50 years from now in schools at all times? I’m skeptical that sort of thing is going to fly. So there’ll be all these debates. There’ll be debates about, mask wearing, about ventilation. 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 these call this the sort of vaccine passport question. But I think we’re going 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’ve already written about, which is if you have proof that you’ve been double vaccinated and going forward had the required booster shots, you 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 negative, 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. But I 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.

HAMILTON: To my mind, I think where we stand today, there are still significant uncertainties. 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. So, the other issue is the development of new variants. We’ve got this Delta variant, which is twice as infectious as the wild type original variant. And that’s completely changed the game. As much as vaccines have changed the game, the Delta variant has also changed the game in the other direction. So we don’t know how well, we don’t know about sterilising immunity. We don’t know the degree to which we’re going to be able to keep on top of these variants, whether vaccine-resistant variants will emerge, right?

There’s just a huge number of uncertainties today. So, 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, Australia has done incredibly well through the pandemic, fewer than a thousand Australians have died from COVID-19. Purely by, there may be some element of luck, but I think significantly it was policy decisions that led to that outcome. And the trouble is we are, as the prime minister’s four-phase plan makes very clear, eventually going to be in a position where COVID, the coronavirus, this special coronavirus is endemic, and we have broad vaccination coverage, but it’s going to, 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.

There will be people in future who are double vaccinated and still will die from COVID-19. And in fact, we’ve had something like 700 deaths per year, so far in the pandemic due to COVID-19. Going forward, 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. They could be significantly greater. They could be in the realm of 2 to 5 thousand per year, if we were to have really broad ranging freedoms and broad vaccinations.

So to me, 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. So it’s going to be difficult. I liked 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.

WALKER: 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 governments’ handling of the pandemic caused you to update your priors about Australian federalism?

HOLDEN: 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 wanted a strong federal government. And I think what those debates showed and, full disclosure, I’m certainly more of a HAMILTONian in that debate, but I think what those debates showed was there were some issues where, local control’s 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 that’s certainly fractured to a degree, right?

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, local information. Hayek gets a bad name for things like the road to serfdom and things like that. But, Hayek wrote an extraordinary paper in the American economic review in 1945 where he introduced two concepts. One, that the 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 one is the idea that you want to give authority in an organization to people that 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, when Steve was earlier talking about how the run the health care system for all of 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 part, an important role in getting jabs into arms. 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, where does Dan Andrews and Gladys Berejiklian, where do they get the temerity to actually, 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 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 and 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.

HAMILTON: So I agree. I think it’s, well, I’m “HAMILTON“. I’m more of a Jeffersonian, but that’s one area we disagree on Rich, but 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 the idea is…

WALKER: Brandeisian view.

HAMILTON: 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, there’s obviously the sort of a taboo 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 New Years. They love their hermit kingdom.

So we shouldn’t, we shouldn’t begrudge them, seceding from Australia. If they want to do it, they should feel free to do it. 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. And we should recognize that in all sorts of circumstances, the states probably will do a better job.

Now, the only thing I would say is there are circumstances where federal coordination or federal control is really, really important, right? So when there are significant spillovers across states, where one state can negatively affect another where different states have different abilities to raise revenue, there’s an insurance aspect to having a federal system, 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. 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.

HOLDEN: 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, others who’ve said this were right that, 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 showed 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. And 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 only get so many data points from that. So sure, yeah, Queensland might do something a bit different and, 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.

WALKER: 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 yet, 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?

HOLDEN: Do you want to go first Steve?

HAMILTON: No. I want you to go first.

HOLDEN: Yeah fair enough. I would too. Look, I think, Andreessen overstates that a bit, and 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, 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, 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 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 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 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, 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, maybe Chris Bowen’s got something useful to saying 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.

HAMILTON: Yeah. So that wasn’t enough time for me to figure out an answer, but let me do it on the fly.

Scott Morrison is kind of the Steven Bradbury of Australian politics, right? I mean, I’m sure he didn’t ever expect to be Prime Minister when he became Prime Minister. And going into the pandemic, I didn’t know much of him. I didn’t have particularly positive or negative views. You know, I was fairly neutral. And early days in the pandemic, what he showed, 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 were 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, I think that was a significant part of it, was something I thought we should actually feel quite glad about and lucky for. The last thing you would want in those circumstances is some really stubborn leader who just won’t change tack no matter what. So that was great. And that actually served us pretty well. And even recently, with the vaccine rollout, as frankly disastrous as it has been, they have showed an unwillingness to… Everything that Richard and I have ever recommended in our 11 or 12 opinion pieces, basically is now government policy.

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. 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. So I don’t know. And it’s easy to look through rose-coloured glasses back at the eighties as this golden era. But my sense is that in times past we were able to attract a higher caliber of individual into politics. And so my goal, if I was designing our political system would be to gear the incentives as much as we can towards maximising talent and hope that that maximises 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.

WALKER: Steve, Richard, thank you for your time.

HOLDEN: Thanks, Joe.

HAMILTON: You’re welcome.