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MARKET MENAGERIE

Stanford University Press

Contents

Illustrations.................................................................................................xiAcknowledgments...............................................................................................xiiiIntroduction..................................................................................................11 Well Beyond Market Failure..................................................................................322 The First Market Environment: Trouble in the Making.........................................................553 "Essential" Markets, Public Health, and Private Learning....................................................674 Demand and Democracy........................................................................................845 The Second Market Environment: Learning by Providing in Global Regulatory Harmonization.....................996 Demand as Necessary but Not Sufficient: Vaccine Procurement Markets.........................................1217 The Third Market Environment: Uncertain State of New Technologies...........................................1358 Health Technologies in Comparative Global Perspective.......................................................1639 Markets and Metropolis......................................................................................186Conclusion: Soft Determinism in the Market Menagerie..........................................................219Notes.........................................................................................................247Index.........................................................................................................311

Chapter One

A Time for Integration: Evolution of States and Markets

This chapter looks beyond market-failure explanations in understanding the health sector in late industrial states. It advocates for a better appreciation of markets as processes, not immutable institutions, and for a wider, more evolutionary understanding of variety in markets and developmental states. Such an approach will serve us better across time and geographic scales. Rather than "the" market, the term "market menagerie" captures the many species of extant markets. The task of development is to structure the markets within this menagerie by plans, regulation, and other tools to serve broader developmental goals for city and nation.

I argue here for an analytical lens with three essential components: First, move beyond traditional market-failure explanations in economics and political economy. Second, draw from insights of the economics of technical change and its evolutionary contributions to provide essential grounding in institutional variety. Third, integrate urban and regional planning and industrial geography for a local institutional lens on technological advance and community institutions. By marrying these evolutionary, institutional approaches with the more traditional developmental political economy of "underdevelopment," "development," and developmental states, we can appreciate how to move beyond market-failure approaches and to assess the institutional triad's dilemmas.

Technology's Insights for Markets

Analysts have oft en argued that certain medicines and vaccines remain unproduced or unavailable because of "market failure." Many of these failures arise from more traditional arguments of public goods and externalities, and still others (still traditional) because of monopolies. "When markets fail" is then the very broad rationale for demarcating nonobjectionable boundaries for state and planning action in producing public goods such as health, defense, education, or public transportation.

There are several drawbacks to thinking of developmental interventions as primarily justified on market-failure grounds. I argue here that although the health sector has many market-failure candidates, the state's developmental task moves well beyond them. Moreover, such an explanation irrespective of the technologies involved is simply misleading. Technological advance often creates new markets and new pressures on states. As technologies differ, so do regulations, market structure, and the plans to accommodate them. Indeed, technological learning itself may require market failure such that specific priorities may be achieved. For instance, where late industrial production is concerned, states oft en step in to ensure that price is not equal to marginal cost and purposefully induce market-failure conditions so that firms can learn to adapt to imported technologies and produce them in-house.

Some failures arise, it is said, because markets are underdeveloped or absent in developing economies or are closed to more efficient private-sector participation. Indeed, market failure as an idea is so dominant that most textbooks describe development in no other terms but as a colossal symptom of market failure and sharply restrict when states should act. In turn, many "developmental states" have usurped that mantle by combating market ideology and building interventionist states. However, unlike sectors such as garments, footwear, or video recorders, the health sector calls for a dramatically different approach to markets and planned economic development precisely because both industrial and health entitlements must be considered. Michael Lipton has correctly argued that perhaps the most challenging issues in development studies are those that arise from market success and government success, not the tired arguments of market and government failures. The commercial success of the pharmaceutical industry complicates health care in many ways, as we shall see, but it can also provide a powerful boost. It is precisely because the industry is so successful that we should look more closely at markets and state choices.

What is this "developmental" approach? Although this approach has a tautological quality, we often think of "developed" economies as those whose more visible institutions do not obviously contradict one another (although there may well be inherent conflicts that become visible over time). This notion of development accommodates variety and diversity. If development is seen as a complex process of creating and legitimizing institutions that mostly complement one another, and at the same time including more interested parties at the table, then states and urban and regional planners, for instance, need not step in only when markets fail. They may also build complementary bundles of markets and nonmarket institutions to provide an inclusive umbrella for different actors. These may require creating for-profit or not-for- profit organizations, supporting those that arise, or ensuring, for example, that pharmacy locations are even across a city. They may be called on to ensure that some groups are not excluded from insurance coverage and that children's health does not suffer from the private sector's pullout from some pediatric vaccines. In this realm states and anticipatory plans are especially vital because the public sector is not only a critical producer, funder, and buyer of health technologies (defense being an important reason to invest in health as well), but is also vital to delivery and the design of institutions for collective consumption (such as insurance policies, but also easily accessible clinic locations or mobile vans). The economic organization of the...