On this episode of Freakonomics, Prof. Andrew Lo discusses the economics of drug development. “It’s important that we get the pricing of these vaccines correct so that they provide both a reasonable rate of return to investors who have risked their capital to develop these vaccines, while at the same time making sure that there’s no price gouging going on and that ultimately we provide access to everybody,” says Lo.
Writing for The New Yorker, Bernard Avishai spotlights Prof. Andrew Lo’s work exploring the need for a revolution in financial engineering to help spur the development of vaccines, and how a vaccine megafund could have assisted in bringing the Covid-19 pandemic under control. “The more I studied this, the more I realized that finance actually plays a huge role in drug development,” says Lo, “in many cases, way too big a role.”
Prof. Andrew Lo speaks with Barry Ritholtz of Bloomberg View about the field of economics. Lo explains that his new book chronicles his “intellectual journey from a diehard devotee of efficient markets and rational expectations into the realm of first psychology and behavioral finance, and then to neuroscience and how people really make decisions.”
In an article for the Financial Times, Laura Noonan highlights Prof. Andrew Lo’s work investigating how the theories of financial engineering could be used to fight cancer. “In cancer drug development, because the risks of failure are so high, the probability of success goes up quite dramatically if you create a portfolio,” says Lo.
New research by Prof. Andrew Lo shows that the criteria currently used to evaluate whether drugs are safe and effective is too strict, reports Carolyn Johnson for The Washington Post. The study suggests that, “for many devastating diseases, the current standards are too risk-averse, erring on the side of keeping drugs off the market.”
For his work developing pricing models, Prof. Stephen Ross has been awarded the Deutsche Bank Prize in Financial Economics, Reuters reports. The Center for Financial Studies, which awards the prize, said that, "Ross’s models have changed and advanced economic practice profoundly.”
Prof. Stephen Ross has won the 2015 Deutsche Bank Prize in Financial Economics, reports Jack Newsham for The Boston Globe. Jan Pieter Krahnen, director of the Center for Financial Studies, which presents the prize, explains that Ross’ work “has shaped today's thinking in financial innovation, practice, and policy.”
Financial Times reporter John Authers highlights Prof. Andrew Lo’s work examining how human aversion to risk impacts financial decisions. Lo’s research provides evidence that “investors in markets will take risk-averse actions rather than the purely rational decisions that economists have classically assumed."
Wall Street Journal reporter Ed Silverman interviews Professor Andrew Lo about his proposal that a public-private partnership could solve funding issues for drugs research and development. “Right now, the risk of failure [in developing an Alzheimer’s treatment] is far too high for any single pharmaceutical company to take on,” Lo explains.
Lauren Tara LaCapra of Reuters writes about Professor Andrew Lo’s recent work for the Treasury Department. Lo is helping to build tools to find potential credit risk in the banking industry, starting with the mortgage market.
In a piece written for Scientific American, Professor Andrew Lo and Dr. Roger Stein write about their belief that financial engineering can help cure cancer. By restructuring investment properties, the researchers believe they can encourage investment in the pharmaceutical industry, providing much needed funding for the development of new drugs.