Antimicrobial resistance already causes over 1.2 million deaths annually, and projections suggest this could rise to 10 million per year by 2050, surpassing cancer as a leading cause of global mortality. The science of why resistance happens is well understood. Yet what remains unsolved is not a scientific problem, but an economic one: why, knowing all of this, is the market failing to produce the antibiotics we need?
The Tragedy of the Commons and Resistance as a Shared Resource Problem
In 1968, ecologist Garrett Hardin described what he called the tragedy of the commons: the tendency for individually rational behaviour to collectively destroy a shared resource. His classic example was a shared pasture where each farmer has an incentive to graze one more animal, because the benefit is entirely to them while the cost of overgrazing is distributed across everyone as the pasture is depleted through the logic of self-interest operating without constraint.
Antibiotic resistance is a tragedy of the commons in an unusually severe form. Every time an antibiotic is used, it exerts selective pressure on the bacterial populations it encounters, accelerating the evolution of resistance and incrementally reducing the drug's effectiveness for everyone who might need it in the future. The individual transaction where a patient receives treatment, and a doctor fulfils their clinical duty is an entirely rational process. The aggregate effect is the depletion of a shared resource: the effectiveness of the antibiotic itself.
What makes this form of the commons problem particularly difficult is its temporal dimension. The costs of overuse today are not shown immediately as they accumulate over years and decades, and will eventually fall disproportionately on people who have no voice in the prescribing decisions being made right now. The patient in 2025 who receives an unnecessary antibiotic imposes a cost on the patient in 2045 who will face a resistant infection.
The Externality Problem
The reason the market fails to account for this cost is that resistance is a negative externality (a cost imposed on third parties who are not part of the original transaction and have no say in it). When a doctor prescribes an antibiotic that is not clinically necessary, or when a farmer uses antibiotics to accelerate livestock growth rather than treat disease, the cost of accelerated resistance is not borne by the prescriber, the patient, or the farmer, but is distributed across society, across borders, and across generations.
The agricultural dimension of this externality is enormous and largely invisible to most people. Approximately 70% of all antibiotics consumed globally are used in livestock farming, and the majority is for growth promotion rather than the treatment of disease. The same drugs that treat human infections are administered to healthy animals in low doses over long periods which results in almost perfectly designed conditions for selecting resistant bacterial strains. The resistant strains move through food supply chains, water systems, and direct animal contact into human populations worldwide.
In economic theory, the standard solution to a negative externality is a Pigouvian tax, a levy on the activity equal to the marginal social cost it imposes, designed to force the decision-maker to internalise the full cost of their choice. In principle, taxing antibiotic use at a rate that reflected the true social cost of resistance would reduce overprescription and over-use in agriculture to the socially optimal level. In practice, calculating that cost across jurisdictions and generations is extraordinarily complex and coordinating a global tax on antibiotic use across over 190 nations is a political challenge.
The R&D Crisis
The supply-side failure is equally severe, and in some ways more alarming. Not only are existing antibiotics being depleted through overuse, but almost no new ones are being developed to replace them. Of the approximately 45 antibiotics currently in clinical development globally, most are modifications of existing drug classes rather than genuinely novel mechanisms, and the majority will fail before reaching market. The pharmaceutical industry has largely abandoned antibiotic research, and the economic logic is entirely rational given the structure of the market.
Antibiotics are a uniquely bad investment compared to almost any other drug class.A new antibiotic would likely be priced cheaply as antibiotics are generic commodities, and payers resist high prices for drugs that treat short-term infections. Treatment courses last days or weeks, not the years or decades that chronic disease drugs are taken, meaning the revenue per patient is minimal. And crucially, any new antibiotic effective against resistant strains should, from a public health perspective, be held in reserve and prescribed as sparingly as possible to preserve its effectiveness for as long as possible. The socially optimal strategy for deploying a new antibiotic is commercially unattractive: a drug that doctors are actively encouraged not to prescribe generates almost no revenue.
The development costs of an estimated $1–1.5 billion per drug over more than a decade, with a high probability of failure at every stage of clinical trials acts as a further deterrent for research and development. The result is a market failure of undersupply as the social value of a new antibiotic, measured in lives saved, resistant infections prevented, and surgical procedures made safe vastly exceeds its commercial value. The market therefore produces far fewer new antibiotics than society needs, and will continue to do so as long as the incentive structure remains unchanged.
The Principal-Agent Problem in Prescribing
The externality problem is compounded at the point of prescribing by a familiar economic dysfunction. Readers of the US healthcare article will recognise the principal-agent problem: the patient (principal) wants to feel better quickly, and the doctor (agent) faces social and professional pressure to satisfy that demand even when antibiotics are not clinically indicated, such as in viral infections where they have no effect whatsoever.
In most healthcare systems, there is no financial penalty for overprescribing and no mechanism by which the individual prescriber bears any of the cost of the resistance they accelerate. In lower-income countries, antibiotics are frequently available over the counter without prescription, removing the agent entirely and allowing patients to self-prescribe in incorrect doses, for incorrect durations, against conditions they may have misidentified, accelerating resistance while delivering minimal therapeutic benefit.
What Has Been Tried and What Might Work
Stewardship programmes are coordinated efforts to monitor and restrict antibiotic prescribing in hospitals and at a national level and they have shown local effectiveness. England's national antibiotic prescribing data, published annually, has helped drive meaningful reductions in community prescribing. However, stewardship addresses consumption without solving the R&D problem, and its effects are limited by the absence of equivalent programmes in countries that account for the majority of global antibiotic use.
Push incentives, direct government funding of early-stage antibiotic research, have been deployed through bodies like BARDA in the United States and the CARB-X partnership internationally. These have supported promising early research but have not solved the late-stage commercial viability problem that causes companies to abandon development before reaching market.
Another fundamental constraint is international coordination as resistance does not respect borders. A new superbug emerging in one country becomes a global problem within months, however the economic institutions needed to manage resistance as a global commons through binding international agreements, coordinated pricing mechanisms, shared R&D funding, barely exist as the WHO's global action plan on antimicrobial resistance provides a framework but lacks enforcement.
Emily Jong