Economics

Background You are on a work integrated learning experience at Colgate-Palmolive Australia Head Office in Sydney. Over a morning tea break you discover that you are not the only student working there from QUT. There are students from a diverse range of undergraduate programmes including process engineering, business (majoring in marketing, accounting, human resource management and advertising) and property economics. Everyone was a bit bemused as to what the student from property economics was working on. They had secured a placement assisting the finance team with asset valuation for the purposes of negotiating a better deal on insurance for the commercial properties the company owns. All of you had one thing in common: you had studied BSB113. One of the group walks over to the sink and notices a bottle of liquid antibacterial hand wash. They mention that the US Food and Drug Administration (FDA) had banned several key chemicals which are in liquid and bar antibacterial soaps including triclosan and triclocarban. Not everyone in the room understood the rationale for the ban, but a quick google search (thank goodness for smart phones) pulls up a couple of articles. These reported there were concerns from scientists that triclosan and triclocarban may be contributing to reduced antibiotic resistance and the rise of so- called multidrug resistance bacteria (also sometimes referred to in the media as superbugs) (Chettle, 2016 and Hartmann, 2017). Someone in the group thinks that this is all just media hype and over-reaction. However, you happen to be a bit of an expert (you had been following the Facebook page BSB113 Connected and it had piqued your interest in a broad range of economic and social issues).You take the floor. You explain that antibiotic resistance is a subset of a wider problem called Antimicrobial Resistance (AMR). Estimates of the costs of AMR, if it continues on its present trajectory are 10 million deaths worldwide by 2050 (surpassing deaths from cancer) and costs upwards of $100 trillion (Review on Antimicrobial Resistance, 2014). The conversation then takes a different turn. It is time to play the blame game. In economics speak that is code for analysing the economics behind the problem (e.g. what economic theories/model explain how we got to this point). You mention that you remember that the lecturer in BSB113 had used a simple partial equilibrium diagram to demonstrate how a negative externality in consumption would result in over consumption of a good and an inefficient equilibrium above the socially optimal equilibrium. Someone in the group questions if it is in fact a negative externality in production that is the appropriate economic model. A negative externality in production also results in an inefficient equilibrium above the socially optimal equilibrium. Their rational is that a key contributor to AMR is clinicians over-prescribing antibiotics (Van Boeckel, et al., 2014). A discussion follows and it is concluded that the clinician is effectively an agent for the patient. That is, the clinician prescribes a drug to be consumed by a patient and this is captured in the demand curve. Next, the discussion turns to policy solutions. You add more information to an already complex problem. Antibiotic over-consumption extends further than clinical prescriptions of antibiotics to humans. It is estimated that over one-half of the antibiotics consumed in the U.S. are in food animal production (Alliance for the Prudent Use of Antibiotic, 2012). Someone notes that this does not change the economic model, but it does mean that policy solutions to move the market in antibiotics to a socially efficient level of consumption will be different depending on which subset of “consumers” the policy is targeted at (OECD, 2016). Research task Your musings were overheard by the visiting Johnson and Johnson CEO. The CEO was impressed by your insights and has asked that you write him an economic analysis of the over consumption of antibiotics. You email your unit coordinator for Economics desperate for some help. Jenni suggests breaking your report down as follows: 1. A brief overview of issues related to over consumption of antibiotics. 2. A description of the relevant economic theory to explain the effects of over consumption of antibiotics on economic efficiency. 3. A critical analysis, informed by research, as to effective policies to reduce antibiotic consumption to achieve the socially optimal level of antibiotic consumption. • TWO targeted policies to reduce antibiotic consumption. Policies may be price or non-price policies as appropriate. o This part of your essay requires you to understand that the problem of over consumption of antibiotics is multi-faceted and has be targeted from a number of angles. Having said that, keep it simple. Give an overview of the policy, how it will work to reduce antibiotic consumption and a summary of the potential strengths and weaknesses of that policy. Note, you are not required to say that either policy is better than the other. Jenni also recommends that: • you write an unbiased informed critical economic essay and not a political document • your essay is academically rigorous with references to relevant data and academic literature • you do not get drawn into reporting emotive argum