A Man With 'Pull' - Economist develops innovations in medical research funding

November 18, 1999

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By Ken Gewertz
Gazette Staff

Professor of Economics Michael Kremer (left) has been characterized by Robert Barro, the Robert C. Waggoner Professor of Economics and Kremer's thesis adviser, as "one of the most exciting people in economic development today . . . He's very imaginative. He has a breadth of interests that makes him seem more like the economists of an older generation." Photo by Jon Chase.

After graduating Harvard College in 1985, Michael Kremer went to Kenya to teach high school and, while there, came down with a case of malaria.

He received treatment and recovered, but the experience stayed with him, emphasizing how devastating malaria and other tropical diseases can be for people in developing countries who may not have access to reliable medical care.

Today, as a development economist, Kremer works toward preventing malaria and other tropical diseases by devising new and innovative ways to support research. One of the mechanisms he has explored is called "pull funding."

"The traditional type of funding where scientists apply for a grant and then conduct their research is called push funding," he explained. "One problem with it is that scientists have an incentive to exaggerate their chance of success. This can make it hard to tell which projects deserve further support. With pull funding, there is a pre-commitment to purchase, so if someone comes up with an effective vaccine, the fund will pay for it. The advantage is that nothing is spent until the vaccine is developed."

Pull funding will encourage the self-selection of good projects, Kremer said, because the prospect of a high stakes reward will serve as an incentive to pharmaceutical or biotech firms to undertake research that has a good chance of success.

Kremer joined the Faculty of Arts and Sciences this year as professor of economics. His former thesis adviser, Robert Barro, the Robert C. Waggoner Professor of Economics, called Kremer "one of the most exciting people in economic development today."

Barro said that in his doctoral research, Kremer "took on problems that other people had looked at and approached them from a new angle. He’s very imaginative. He has a breadth of interests that makes him seem more like the economists of an older generation."

Kremer and Jeffrey Sachs, the Galen L. Stone Professor of International Trade, wrote an article for the Financial Times about using pull funding to stimulate research on vaccines for tropical diseases. He is now working on a longer article expanding on that same subject.

In this article Kremer focuses on malaria, tuberculosis, and HIV. He points out that these diseases kill an estimated 5 million people each year and that virtually all malaria cases and more than 95 percent of new HIV and tuberculosis cases occur in developing countries.

Too little research has been done to develop vaccines for these diseases because pharmaceutical companies don’t think they can recoup the money they would spend on funding the research, he said. Even if these companies developed vaccines and patented them, the prices they would have to charge to make a profit would prevent most of the world’s sufferers from obtaining them.

The solution, Kremer believes, is a globally coordinated effort to set up an incentive fund to reward researchers who develop a vaccine that meets certain agreed-upon criteria. Global cooperation is called for, he writes, "because research on vaccines is an international public good."

The difficult part of pull funding is exactly how to design the fund. "What price do you set? How do you promise to buy something that hasn’t been developed yet? How do you describe it?" Kremer is working on a paper that offers a carefully argued analysis of these problems and a procedure for establishing quantitative solutions.

Kremer does not advocate pull funding as a replacement for traditional push funding, but rather a complement to it.

"We can’t rely entirely on pull funding," he said. "We need grants to support basic research, but we also need a vaccine for malaria."

Some of Kremer’s other work takes a similar approach to the economics of research and development. Another article suggests that the federal government ought to establish a fund to purchase patents and put them in the public domain. Such an approach, he argues, would be especially useful with products such as medicines that would be beneficial to large portions of the populations. Such a fund would be supported by tax money, but Kremer does not see this as a drawback.

"You pay either way, either in taxes or by paying higher prices. Granting a patent is equivalent to establishing a high tax on a particular product. It may be better to have a lower tax on a wider range of products. That way, in the case of medicines, the product could be produced as a generic and made available to people who need it."

Kremer’s other work has focused on a wide range of topics, including international development, the spread of AIDS, schooling, and the relationship between population growth and technology from prehistoric times to the present. A prevailing interest of his is adapting biological models to the analysis of economic issues.

Kremer’s focus on improving people’s lives developed early. As a high school student in Manhattan, Kans., he already had a consuming interest in helping the developing world.

The fact that he followed the path of scholarship as a way of pursuing those interests may have to do with the fact that his parents are both professors at Kansas State University. His father teaches architecture and his mother English.

Kremer completed both his undergraduate and graduate work at Harvard, earning his A.B. in social studies in 1985 and his Ph.D. in economics in 1992.

Before beginning his graduate studies in 1989, Kremer taught for a year in Kenya. Then, upon returning to the United States, he founded and served as first executive director of WorldTeach, a non-profit organization now supported by the Harvard Institute for International Development (HIID) and the Center for International Development (CID). WorldTeach currently places more than one hundred volunteer teachers annually in Costa Rica, Ecuador, Namibia, and China.

Prior to joining the Harvard faculty, Kremer taught economics at the Massachusetts Institute of Technology. In 1996 he received the Presidential Early Career Award for Scientists and Engineers, and in 1997 he received a MacArthur Fellowship, the so-called "genius award."