Michael Kremer on Economists as Founders

Episode Summary

Executive Summary: Michael Kremer describes a career built on using economics to solve real-world problems through founding organizations and designing institutions that better reward innovation. He highlights successes in development, deworming, education, and advanced market commitments, arguing that experimental economics should inform practical policy, especially where market failures and weak incentives suppress socially valuable innovation.

Main Topics: Founding organizations as applied economics (Priority: 5/5): Kremer explains why he enjoys founding nonprofits and public innovation initiatives: it combines intellectual problem-solving with direct impact, and it fits naturally with experimental economics and field implementation. Advanced market commitments vs. patent buyouts (Priority: 5/5): He contrasts his earlier patent buyout proposal with advanced market commitments, arguing AMCs were more politically feasible because they reward products rather than buying out intellectual property outright. Vaccine markets and global public goods (Priority: 5/5): Kremer details how communicable disease externalities, government commitment problems, and multinational coordination failures justify intervention to stimulate vaccine development and access. Deworming, education, and development policy (Priority: 4/5): He discusses the scale-up of deworming, the reasons adoption remains incomplete, and how remedial education, structured pedagogy, and merit scholarships can improve learning outcomes at low cost. Growth, technology, and institutions (Priority: 4/5): Kremer argues that long-run growth depends primarily on technological change, and that the key policy lever is improving institutions for research funding, IP, and innovation rather than assuming easy convergence. COVID-19 vaccine economics and industrial organization (Priority: 4/5): He applies AMC-style thinking to COVID-19, emphasizing the need for upfront manufacturing capacity, supply-chain investment, and a mix of push and pull incentives. Culture, convergence, and development (Priority: 3/5): The conversation closes with reflections on culture, literature, and the rapid catching-up of poorer countries, while warning against simplistic or deterministic cultural explanations of underdevelopment.

Key Arguments: Founding organizations is a natural extension of experimental economics because both require iterative testing, adaptation, and implementation in real-world settings. Advanced market commitments are politically more feasible than patent buyouts because firms and policymakers are more willing to commit to purchasing products than to relinquishing patents. The pneumococcus AMC is presented as a major success: it led to multiple vaccines, large-scale vaccination, and an estimated 700,000 lives saved. AMCs work best when the desired product is known in advance; they are much harder to use for inventions that society does not yet know it needs, like the post-it note. Market failures in vaccines stem not only from risk, but from externalities, global public-good problems, and government underpayment relative to social value. Deworming has scaled substantially, but residual underprovision persists because beneficiaries are poor, effects are chronic rather than dramatic, and programs fall between bureaucratic ministries. Education policy should focus on meeting students where they are through remedial learning and structured pedagogy rather than assuming curricula alone will work. Long-run growth is driven by technology, but technology creation is getting harder; policy should therefore improve institutions that raise innovation incentives and research effectiveness. Poor countries are now broadly converging toward rich countries, which Kremer sees as encouraging evidence against deterministic views of underdevelopment. For COVID-19, the social value of vaccine acceleration is enormous, so governments should use both advance purchasing and manufacturing support before trial completion.

Data Points: Number of nonprofits founded: At least 5, with a 6th to come - Tyler cites Kremer’s founding record at the start of the interview. AMC financing pledge: $1.5 billion - Countries and the Gates Foundation pledged this to finance a pneumococcus vaccine. Estimated lives saved by pneumococcus vaccines: 700,000 - Kremer cites estimated lives saved from vaccines developed under the AMC. People vaccinated via pneumococcus AMC: Hundreds of millions - The pneumococcus AMC led to large-scale vaccination in developing countries. Deworming cost: As little as 50 cents per person per year - Kremer references the low cost of deworming in parts of Africa. People reached by deworming programs: About 150 million people per year - He describes current deworming scale across Kenya, India, and other countries. Development Innovation Ventures portfolio: 41 innovations - Kremer discusses early USAID investment outcomes. Quantified innovations in portfolio: 4 out of 41 - Only four innovations in the early portfolio had benefits quantified for the rate-of-return analysis. Return lower bound: 5-to-1 - Lower-bound estimate comparing quantified benefits to total costs in the early DIV portfolio. Global economic loss from COVID-19: $500 billion per month - Kremer uses this estimate to argue for aggressive vaccine investment.

Pivotal Quotes: "I think there’s a lot of relationship between the experimental method and the things that are needed to help found organizations." — Michael Kremer: On why his research style fits founding nonprofits and policy initiatives. "The task ahead of us is getting harder and harder. And that means that where there's a race between the total resources that are going into innovation and the increasing difficulty of the task." — Michael Kremer: On why growth depends on institutional support for technological innovation. "The world economy is losing $500 billion every month due to COVID." — Michael Kremer: On why rapid vaccine development and production are worth large public investment.

Implications: Kremer’s framework suggests governments should behave more like strategic innovators: fund, test, and reward high-impact solutions directly. For development, health, and pandemic response, better-designed incentives may unlock major gains at low cost.