#PandemicGoals: Putting the brakes on infection (Part I)
How can crushing our #PandemicGoals help this flu season?
In this series, we’re looking ahead by learning from the past. For three major goals during a burgeoning pandemic, we will learn the core underlying economic problem to solve and then discuss solutions which proved effective- and may help inform future preparations. In particular, we’ll keep an eye out for solutions both from public policy and that emerge naturally from ordinary economic activity.
1. Core Economic Problem: Infection’s effects are bigger than yourself
This winter, we’re facing increased levels of flu, RSV, and whatever that bug is your coworker can’t shake. Happily, none of these are as deadly as the early coronavirus spread, but they all still present a problem for daily interactions.
The crux of the economic problem from infectious spread isn’t the interactions themselves. Say what now? To understand why, consider a typical interaction of concern during early 2020: A young gourmand enjoying a meal at her favorite restaurant. Who benefits and who is hurt by this?
The gourmand benefits from an enjoyable experience and a full belly. The restaurant owner benefits by being able to pay his rent.
What about infection risk? Both the gourmand and the restauranteur face infection risk in this scenario. However, this risk isn’t the problem! In choosing to eat out or keep his business open, each must confront their own health risks and weigh them against their benefits before choosing to engage in the transaction. A young, single gourmand might make different choices than an older one with asthma, for example. The restauranteur may choose reduced hours or closing the dining room to contain his risk while preserving some income.
The risk which does present an economic problem is risk that bleeds beyond these two individuals in the transaction. If the gourmand happens to live with her grandma or works in a crowded office the next day, she brings infection risk to these extra individuals- who neither enjoyed the meal nor got a tip! If the gourmand doesn’t include this extra risk in her decision, her final choice isn’t based on the full cost and benefit of the transaction.[2] This extra risk affecting those beyond the two in the transaction is called an externality. (Read more about externalities and how gossip can redeem itself here!)
2. Information is the best medicine.
What was one of the most efficient ways to combat this problem? Information. One high impact government policy which reduced initial infection spread was early dissemination of coronavirus information on initial infections, spread, and risk factors. Research on individual movement at the start of the pandemic shows that information, such as the first COVID case in any area, was a larger driver of people staying home than than legal stay-at-home orders. What’s more, it differed by risk factors, highlighting how information helped create better choices at an individual level.[3]
Information is still an important tool today. Leading into this flu season, health providers have been warning their communities about likely higher infection rates coupled with coronavirus and RSV and we’ve seen protective public responses of vaccination campaigns and increased masking.
3. Markets and a triple threat approach
If you look around, we see that businesses and communities quickly produced ingenious solutions to this externality problem. I’ll list three types of approaches here, but I’d love to hear your observations as well.
First, for large organizations, these slippery extra infection costs are not a formless external threat, but quickly become an internal problem. The larger the group of employees, the more this externality infection risk compounds within the workplace itself. As such, many large employers moved to remote activity well before mandates, such as Facebook, Amazon, and large universities.
Second, social pressure can force people to consider this “extra” infection risk in their decisions. In addition to reducing risk simply because you love your grandma, news and social media promoted preventive actions. Much like “green” products command higher prices, businesses that kept employees and customers safe were able to reap the social and economic rewards of accounting for the externality.
Finally, creative businesses helped us innovate our way out. Services such as curbside pickup, food delivery services, virtual educational resources, and online payment systems eliminated both the extra externality cost and individual infection risk by bringing us home. Thanks Zoom!
This series is part of a larger discussion I’ve published with Grace Lyons (WFU alumnae) with the Mercatus Center at George Mason University. Check it out!
As always, keep me updated on what you’re up to or reach out to chat with me about these issues!
Best,
TMD
Continue with “Help Those in Economic Distress (Part II).
[1] See the NBER working paper by Agrawal et al., “The Impact of COVID-19 Vaccine Distribution on Mental Health Outcomes.”
[2] “If the gourmand doesn’t take the additional risk into account”- In fact, if the gourmand loves her grandma or cares about her co-workers, then she may indeed take this into account. I submit that the above discussion might be an underestimate of how a thoughtful society behaves. I do hope you are able to cite similar thoughtful examples from your own experiences.
[3] For further reading on patterns and causes of individual foot traffic see: 1. Gupta, Sumedha et al. “Mandated and Voluntary Social Distancing during the COVID-19 Epidemic.” Brookings Papers on Economic Activity, 2020, pp. 269–315. 2. Christopher J. Cronin, William N. Evans, "Total shutdowns, targeted restrictions, or individual responsibility: How to promote social distancing in the COVID-19 Era?, "Journal of Health Economics, Volume 79, 2021. 3. Sumedha Gupta, et al. " Tracking Public and Private Responses to the COVID-19 Epidemic: Evidence from State and Local Government Actions" American Journal of Health Economics 2021 7:4, 361-404 3.