Research
Lo, Andrew W., and Ishan Sharma (2022), Pandemic Readiness Requires Bold Federal Financing for Vaccines, Day One Project.
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Most people will experience a severe pandemic within their lifetime, and the world remains dangerously unprepared. In fact, scientists predict a nearly 50% chance––the same probability as flipping heads or tails on a coin––that we will endure another COVID-19-level pandemic within the next 25 years. Shifting America’s pandemic response capability from reactive to proactive is, therefore, urgent. Failure to do so risks the country’s welfare.
Getting ahead of the next pandemic is impossible without government financing. Vaccine production is costly, and these expenses will hinder industries from preemptively developing the tools needed to halt disease transmission. For example, the total expected revenues over a 20-year vaccine patent lifecycle would cover just half of the upfront research and development (R&D) costs.
However, research suggests that a portfolio-based approach to vaccine development — especially now with new, broadly applicable mRNA technology — dramatically increases the returns on investment while also guarding against an estimated 31 of the next 45 epidemic outbreaks. With lessons learned from Operation Warp Speed, Congress can deploy this approach by (i) authorizing and appropriating $10 billion to the Biomedical Advanced Research and Development Authority (BARDA) (ii) developing a vaccine portfolio for 10 emerging infectious diseases (EIDs), and (iii) a White House Office of Science and Technology Policy (OSTP)-led interagency effort focused on scaling up production of priority vaccines.
Smith, Erin, Rashi Ojha, Andrew W. Lo, Jeffrey L. Cummings, William Hynes, and Harris Eyre (2021), Psychiatric Times.
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Brains are the indispensable drivers of human progress, but brain health issues can wreak havoc on society. Consider the devastation of disorders like depression, anxiety, and Alzheimer disease—which cost the economy trillions each year. There are currently $40.5 trillion allocated to Environment, Sustainability, and Governance (ESG) investing around the world. If only a portion of these funds were diverted into brain health, they could produce major improvements for our society.
Smith, Erin, Diab Ali, Bill Wilkerson, Walter D. Dawson, Kunmi Sobowale, Charles Reynolds III, Michael Berk, Helen Lavretsky, Dilip Jeste, Chee Ng, Jair C. Soares, Gowri Aragam, Zoe Wainer, Husseini K. Manji, Julio Licinio, Andrew W. Lo, Eric Storch, Ernestine Fu, Marion Leboyer, Ioannis Tarnanas, Agustin Ibanez, Facundo Manes, Sarah Caddick, Howard Fillit, Ryan Abbott, Ian H. Robertson, Sandra B. Chapman, Rhoda Au, Cara M. Altimus, William Hynes, Patrick Brannelly, Jeffrey Cummings, and Harris A. Eyre (2021), A Brain Capital Grand Strategy: Toward Economic Reimagination, Molecular Psychiatry 26, 3-22.
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Current brain research, innovation, regulatory, and funding systems are artificially siloed, creating boundaries in our understanding of the brain based on constructs such as aging, mental health, and/or neurology, when these systems are all inextricably integral.
Grand strategy provides a broad framework that helps to guide all elements of a major, long-term project. There are converging global trends resulting from the COVID pandemic compelling a Brain Capital Grand Strategy: widespread appreciation of the rise in brain health issues (e.g., increase prevalence of mental illness and high rates of persons with age-related cognitive impairment contracting COVID), increased automation, job loss and underemployment, radical restructuring of health systems, rapid consumer adoption and acceptance of digital and remote solutions, and recognition of the need for economic reimagination. If we respond constructively to this crisis, the COVID pandemic could catalyze institutional change and a better social contract.
Kosik, Kenneth S., and Andrew W. Lo (2018). Alzheimer’s Disease is About to Become a Crisis. Here’s how California Could Lead, Sacramento Bee, May 22.
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Opinion article by Andrew W. Lo and Kenneth Kosik on the potential role of California in the space of Alzheimer's Disease research.
Lo, Andrew W. (2017), This is Your Brain on Stocks, MarketWatch, June 3.
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Ever since I was a graduate student in economics, I’ve been struggling with the uncomfortable observation that economic theories often don’t seem to work in practice. That goes for that most influential economic theory, the Efficient Markets Hypothesis, which holds that investors are rational decision makers and market prices fully reflect all available information, that is, the “wisdom of crowds.”
Lo, Andrew W., and David E. Runkle (2009), Mind the GAAP—and Find Out About Your Risks, Financial Times, April 2.
Lo, Andrew W. (2009), Everything Tomorrow’s Leaders Should Know, Financial Times, April 20.
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Some people are blaming the economic crisis on financial engineering and business school education. Similar to how the 1986 space shuttle disaster cannot be blamed on aerospace engineering, it is inaccurate to blame the crisis on technical know-how. Rather, the misuse of technology and poor judgment are to blame. Initial evidence about the current crisis suggests that executives at financial institutions did not deem risk assessments to be important. This suggests a lack of judgment, understanding, and training. As financial markets become more complex, it is becoming harder for conventional, two-year MBA programs to sufficiently train MBA candidates. But education beyond this level typically gets no support from the federal government, unlike other engineering fields. The Sloan School of Management at the Massachusetts of Institute of Technology awarded only four PhDs in finance in 2007, similar to other top business schools. To foster greater expertise, it is important to offer scholarships in financial engineering that could be paid for by a small
The Visible Hand: A Review of The Guidance of an Enterprise Economy
Lo, Andrew W. (2018), The Visible Hand: A Review of The Guidance of an Enterprise Economy by Martin Shubik and Eric Smith, Accounting, Economics, and Law: A Convivium 9 (3), 592.
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It is a rare pleasure and honor for a former undergraduate student in Martin Shubik’s popular game theory classes at Yale University to be asked to write a review of his professor’s latest book, The Guidance of an Enterprise Economy, published by MIT Press in 2016. In contrast to the old saw in which “the student is now the master,” this volume confirms that the student is still the student and the master is—and always will be—the master.
Shubik, the world-renowned game theorist, and his co-author, Eric Smith, an impressive physicist cum biologist cum economist at the Santa Fe Institute, have undertaken an ambitious agenda to formulate a grand synthesis of the different levels of economic theory—financial, microeconomic, organizational, and macroeconomic—and reintroduce dynamics within the framework of general equilibrium (GE). They have written a fascinating, provocative, and occasionally frustrating volume that moves a much-neglected topic forward.
If Liberal Democracies Can Resist the Urge to Micromanage the Economy, Big Data Could Catalyze a New Capitalism
Lo, Andrew W. (2018), If Liberal Democracies Can Resist the Urge to Micromanage the Economy, Big Data Could Catalyze a New Capitalism, Science 359 (6376), 644.
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Capitalism is a powerful tool: By compressing enormous amounts of information regarding supply and demand into a single number—the market price—buyers and sellers are able to make remarkably intelligent decisions simply by engaging in self-interested behavior. But in a big-data world, where a supercomputer can fit into our pocket and a simple Internet search allows us to find every product under the Sun, do we still need it?
In Reinventing Capitalism in the Age of Big Data, Viktor Mayer-Schönberger and Thomas Ramge argue that big data will transform our economies on a fundamental level. Money will become obsolete, they argue, replaced by metadata. Instead of a single market price for each commodity, sophisticated matching algorithms will use a bundle of specifications and personal preferences to select just the right product for you. Artificial intelligence powered by machine-learning techniques will relentlessly negotiate the best possible transaction on your behalf. Capital will still be important, they concede, but increasingly just for its signaling content. “Venture informers” might even replace venture capitalists.
Lo, Andrew W. (2018), If Regulations Don’t Bend, They’ll Break, RISK, July 2.
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The tenth anniversary of the disastrous weekend that nearly brought down the global financial system is fast approaching. But in many of the jurisdictions that were central to the crisis, financial regulations introduced in the aftermath, aimed at preventing a repeat, are now being rolled back. The pendulum of regulation is now swinging back towards fewer and looser restrictions – and if the past is any guide, a ramp-up in systemic risk exposures will be the result.