Nobel Laureate Kenneth Arrow discusses economics of new malarial drugs, Oct. 21

Kenneth J. Arrow, recipient of the 1972 Nobel Prize in Economic Science, will discuss “The Economics of New Antimalarial Drugs” at 2:30 p.m. Oct. 21 in the Bryan Cave Courtroom, Anheuser-Busch Hall.

Kenneth J. Arrow
Kenneth J. Arrow

Free and open to the public, the discussion is sponsored by the Undergraduate Economics Association, the Center for Interdisciplinary Studies and Department of Economics in Arts & Sciences. For more information, contact Dorothy Peterson in economics at 935-5644.

Malaria, along with tuberculosis and HIV/AIDS, is one of the big three global killers of the world’s poorest people. It is highly debilitating, causing loss of labor productivity and reduced educational attainment by children, leading to enormous economic, as well as health, consequences.

Kenneth J. Arrow

Kenneth J. Arrow was born in 1921 in New York, New York, educated (for the most part) in the public schools of the city, and graduated from The City College in 1940. He received an M.A. (mathematics) in 1941 and a Ph.D. (economics), both from Columbia University. He served as a weather officer in the United States Army Air Force, 1942-6.

Arrow conducted research at the Cowles Commission for Research in Economics at Chicago before becoming a professor of economics at Stanford. He moved to Harvard (1968-79) and then back to Stanford where he is now Professor Emeritus. He won the Nobel Memorial Prize in Economics with John Hicks in 1972 for his work on general economic equilibrium theory and welfare theory. He has been a Fellow at Churchill College, University of Cambridge, and Visiting Fellow at All Souls College, University of Oxford. He is a member of many associations including the British Academy and the American Economic Association (of which he is Distinguished Fellow and past President).

His research, mostly deals with information as an economic variable, both as to its production and as to its use. Two 1962 papers studied the efficiency with which the market encourages innovation and the implications of learning by doing for economic growth. In 1963 and later papers, he pointed out that the special market characteristics of medical care and medical insurance could be explained by reference to differences in information among the parties involved. This paper provided the intellectual underpinnings for health economics as a discipline.

He has also been a consultant to the RAND Corporation since 1948, staff member of the President’s Council of Economic Advisers (1962), Visiting Research Fellow of Churchill College, Cambridge (1963-4, 1970, 1973), Visiting Professor at the Massachusetts Institute of Technology (1966), Fulbright Professor at the University of Siena (1995), and Visiting Fellow, All Fellows College (Oxford), 1996.

He has been a member and officer of numerous academic societies, including president of the Econometric Society, the American Economic Association, the International Economic Association, the International Society for Inventory Research, and the Society for Social Choice and Welfare. He has published about 240 technical articles and fifteen books on different areas in economics.

Arrow, a longtime professor of economics at Stanford University and influential policy advisor, recently chaired a National Institute of Medicine committee that issued a report on the global war on malaria.

Titled “Saving Lives, Buying Time: Economics of Malaria Drugs in an Age of Resistance,” the report addresses the challenge of making effective antimalarial drugs widely accessible in order to reverse the current increasing trend in deaths from drug-resistant malaria. Because the newer drugs are more expensive than those that they are replacing, the affected populations — among the world’s poorest — cannot afford them.

The report recommends that within the next five years, international organizations and world leaders should begin collectively to contribute $300 million to $500 million annually to create a global subsidy that would make new combination malaria treatments — artemisinin-combination therapies (ACTs) — available to all malaria sufferers for around 10 cents per treatment course, the cost of the old medicines.

Without significant investments in these new treatments, the malaria mortality rate in Africa and Asia could double in a few decades, as the drug now used most frequently is rendered useless by rapidly spreading resistance. In sub-Saharan Africa, about 1 million children die from malaria each year.

The report proposes that the global subsidy be applied very high in the drug distribution chain, to buy the new drugs from manufacturers at competitive prices and then resell them at substantially lower prices to both public- and private-sector distribution organizations within countries where malaria occurs.

Under the committee’s proposal, countries that receive subsidized antimalarials through the procurement system would be expected to monitor how well public and private drug-distribution channels deliver the drugs to the people who need them.

Parade of schoolchildren celebrating Africa Malaria Day (celebrated annually and promoted actively by the Roll Back Malaria Partnership).
Parade of schoolchildren celebrating Africa Malaria Day (celebrated annually and promoted actively by the Roll Back Malaria Partnership).

Since malaria has the potential to evolve resistance to ACTs, the global war on malaria has a two-fold challenge: finding ways to make the drug widely accessible, while at the same time avoiding practices that encourage resistance.

Arrow has called upon the international development community to recognize the effectiveness of ACT antimalarial drugs as a “global public good” — one worthy of a global subsidy to protect their effectiveness. His subsidy plan received high marks at a World Bank-sponsored summit on malaria held last month in Paris.

“We believe the concept has strong merit and could potentially have a significant impact in terms of accessibility to treatment, delaying resistance and ultimately reducing malaria-related death and illness,” said Jean-Louis Sarbib of the World Bank.