Applying the System Asset Pricing Model to Antimicrobial Resistance

each dollar of industry revenue depletes $2.10 of the effectiveness commons

The global antibiotic ecosystem generates 550 billion in annual private payoff while destroying 930 billion in system welfare. The system beta is 2.1: every 1 of private extraction costs 2.10 in future effectiveness.

• System-adjusted payoff at full welfare pricing: −$380 billion/year
• Classification: Slow Hollow Win with catastrophic discontinuity risk
• 100,000 Monte Carlo draws: 0% welfare-positive

No prior study priced all six channels in one numéraire

Health-economics values current cures; AMR studies value mortality; innovation policy values the pipeline. None supplies a single accounting frame mapping private payoff and welfare cost onto a tradeoff frontier.

• Smith and Coast (2013) called AMR burden 'inestimable'
• SAPM monetizes mortality, healthcare, surgical, agricultural, pipeline, and environmental channels
• Welfare shortfall: $930 billion/year across all six

Six pillars, one numéraire, one frontier

W = W_mortality + W_healthcare + W_surgical + W_agricultural + W_pipeline + W_{environmental}, all in $/year. Each pillar measures departure from the pre-resistance counterfactual.

• Mortality: 1.27 million attributable deaths/year (Lancet 2022), valued at $2M/death central estimate
• Healthcare: $693 billion in hospital costs (Gandra et al. 2025)
• Pipeline: Achaogen bankruptcy one year after FDA approval of plazomicin

Channel betas range from 0.8 to 5.2

The largest welfare loss comes from inappropriate prescribing (beta 5.2) and hospital amplification (beta 4.1). Appropriate prescribing has beta 0.57—below unity, but still depleting.

• Inappropriate clinical prescribing: 12% of private payoff, beta 5.2
• Hospital resistance amplification: 22% of private payoff, beta 4.1
• Livestock prophylaxis: 15% of private payoff, beta 2.5
• Pipeline depletion: 8% of private payoff, beta 1.8

Cure and depletion are the same molecular event

The Efficacy Ceiling (Theorem 1) proves that no prescribing protocol, stewardship program, or pipeline operating within a therapeutic system satisfying three axioms—Therapeutic Lethality, Evolutionary Selection, Resistance Mobility—can hold population-level effectiveness above any fixed threshold indefinitely.

• Three axioms: R1 (therapeutic lethality), R2 (evolutionary selection), R3 (resistance mobility)
• Fourteen escape-closure propositions show no within-system escape (EC-2 through EC-15)
• Welfare Gap (EC-7): depletion rate bound connects theorem to SAPM measurement

No stewardship, rotation, coalition, or pipeline escapes the ceiling

Proposition EC-4 (Partial Coalition Insufficiency): any stewardship coalition S ⊂ N cannot guarantee global effectiveness preservation unless S = N. Resistance selected outside the boundary reaches inside through travel, trade, and environmental contamination.

• Drug rotation fails because resistance mechanisms cross-class
• Repeated cooperation fails because R3 ensures global transmission
• Pipeline fails because new drugs face same selection pressure (R2)

Danish agricultural model documents a confirmed game transformation

Voluntary then mandatory ban on growth-promoter antibiotics (1998–2000) reduced livestock resistance rates 50–80% in targeted classes. This is a partial game transformation in the livestock channel only; the human therapeutic Efficacy Ceiling remains.

• Livestock channel shifted from Hollow Win to extraction-rate management
• Human therapeutic channel constrained by R1–R3 axioms
• Reform dividend: welfare correction attributable only to stewardship programs in livestock

Classification holds across 100,000 Monte Carlo draws

P(β_W < 1) = 0.0000% across all simulations. Perturbation robustness (Proposition 1): classification holds for any welfare function W' with supW' − W < $465B/yr.

• 90% CI for β_W: [1.63, 2.81]
• 0/100,000 draws welfare-positive
• Classification invariant to cooperative baseline assumptions

Strategic prescribing adds $930 billion/year in avoidable welfare cost

Nash equilibrium is maximal prescribing (treat the patient in front of you). Cooperative optimum is stewardship-constrained. Price of Anarchy = 1.35: strategic behavior increases total welfare cost by 35% over the cooperative optimum.

• W_NE = 3.59 trillion; W_cooperative = 2.66 trillion
• Avoidable wedge: $930 billion/year
• Lower than CRE deferral game's PoA of 1.95, but absolute magnitude enormous

Implied Pigouvian tax: $2.10 per dollar of industry revenue

The shadow price of system welfare is μ* = 1/β_W = $0.48 per dollar of welfare. System-adjusted payoff is negative at full welfare pricing. Policy should concentrate on channels above unity beta.

• Inappropriate prescribing (beta 5.2): highest return per intervention dollar
• Hospital amplification (beta 4.1): target infection control
• Livestock prophylaxis (beta 2.5): Danish model shows feasible reform
• Pull incentives needed for pipeline (beta 1.8)

The measurements are now in; the institutional structures do not yet exist

The Efficacy Ceiling proves that within-system fixes cannot solve the problem. The Danish model shows that game transformation is possible in one channel. Three institutional pathways are proposed: extraction-rate protocol, conflictoring, and global coordination.

• No binding international coordination exists (only 27% of national action plans funded)
• UK subscription model and CARB-X address pipeline but not the commons
• Conflictoring protocol translates welfare measurements into actor-specific action