Although it seems like the worst of the pandemic is behind us, we are far from returning to a pre-pandemic normal. Half of Americans are unlikely to eat in a restaurant with 25 percent capacity. 52 percent of Americans are uncomfortable with the idea of flying on a plane. Such individuals as Bill Gates and Canadian Prime Minister Justin Trudeau have expressed a growing opinion that life will not be back to normal until there is a vaccine. In the meantime, we will be meandering through uncertainty.
Back in June, research from the University of Chicago suggested that it was not so much the lockdowns that caused the economic contraction, but it is people are afraid to leave their homes because they could contract COVID (Goolsbee and Syverson, 2020). If fear is what is holding people back from feeling like they could spend at pre-pandemic levels, then achieving herd immunity is one of the best ways to do that. Having a vaccine would go a long way to achieving herd immunity.
However, there is at least one major issue with betting on a vaccine to bring us back to normalcy. According to a poll from Gallup, 35 percent of Americans would not get a free COVID vaccine if available. NBC News polling found that only 44 percent would get a vaccine. If the polling data are correct, that could present a major obstacle towards herd immunity. If we cannot get people to take the vaccine for free, perhaps we should pay them to take it. Last month, Brookings Institution fellow Robert Litan made the argument that we should pay $1,000 per person to take the vaccine. A few weeks later, conservative author and Harvard professor Gregory Mankiw endorsed the idea.
The argument for paying people to take the vaccine comes down to two economic concepts: externalities and incentives. First, what is an externality? A positive externality is when the production or consumption of a good or service results in the benefit, often of a third party.
Positive externalities can provide both private and social benefits. Take education as an example. The private benefit is that more education typically results in higher earnings, whereas social benefits can be others learning from your knowledge or benefitting from the services or goods rendered as a result of the education acquired. When I made the case for birth control subsidies six years ago, I argued for the subsidies based on the idea that a) the subsidies would be a positive externality, and b) the cost and overall size of government would be larger if we did not subsidize.
When looking at subsidizing people to take vaccines, we have to ask ourselves the cost of the subsidies versus the cost of inaction. Yes, if we paid 75-80 percent of the population $1,000 per person to take the vaccine, that could run upwards of $300 billion. On the other hand, look at the billions of dollars that have already been spent and Congress would love to spend if they could actually agree on something.
Let's say that we are on board with such a price tag, realizing that $300 billion is a smaller and more desirable number than another trillion-dollar-plus stimulus package. If enough people are hesitant to take the vaccine, as polling data suggest, then an underconsumption could result in not achieving herd immunity. How do we get past this apprehension? To think of it in economic terms, an incentive could be provided. An incentive is a financial reward, usually money or a prize, to make a certain choice. While it would not guarantee a behavioral change, providing financial incentive could nudge enough people in the right direction to achieve herd immunity. To put it in layman's terms, money talks. Money could talk in this case, especially if the price to get a vaccine is right.
At least in concept, the idea of paying people to take the COVID vaccine is a good idea. To play Devil's Advocate, I will question the initial premise, mainly that the COVID vaccine is a prima facie positive externality. I don't say this because I think vaccines are bad or that because I am an anti-vaxxer. Quite the contrary! I got my flu vaccine this month. More to the point, I argued in favor of an opt-out vaccine system six years ago. What I take issue with is a rushed vaccine.
In spite of years of vaccine research, we have yet to develop a vaccine for HIV, Hepatitis C, or the common cold. We also still have not produced a coronavirus vaccine that has passed Phase III. Let's forget those facts for a moment. There is a reality that vaccines typically take several years to produce. The current record for a vaccine is four years with the mumps vaccine. Why? Even if you want to argue that technological development has improved since then, it takes time to make sure that the vaccine is effective and does not have any long-term effects in which the cure could be worse than the disease. There are also the regulatory hurdles, not to mention the coordination, time, and resources required to produce and distribute the vaccines en masse. Adar Poonawalla, who is the CEO of the world's largest vaccine manufacturer in terms of number of vaccines produced (Serum Institute), said earlier this week that we probably will not have enough vaccines for the global population until 2024.
Even if scientists could get past enough of these hurdles, there would still need to be convincing that the process was not rushed. You do not need to be an anti-vaxxer to be concerned about the speed at which these vaccines are being produced. If there is a convincing enough argument that the vaccines are indeed safe, I would be more inclined to support such a subsidy. Until then, I will remain skeptical of the proposal.
Speaking of herd immunity, I heard that the charedi community formed for themselves a type of herd immunity against COVID. The problem with herd immunity (w/o vaccines) is that all the one percenters are disregarded. My friend has an a-fib and hypertension. His doctor told him to avoid movies and restaurants until a vaccine is available. Not to mention that most COVID cases come from dining in restaurants. Tho, its okay to stroll outside in the park.
ReplyDeletePresident Trump claims to have a vaccine for Coronavirus ready by early October or the end of this year. I prefer this rather than waiting ten years, as proposed by Sonendra Gupta of CNN.