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The Economical Control Of Infectious Diseases

When it comes to infectious diseases, many non-economists see the role of economists being to assess the costs of infection – both the out-of-pocket costs directly associated with someone becoming infected as well as those arising more indirectly as the consequences of people being infected filter through the economy. This is a valid role – but it is not the only one and maybe not the most important one.

Writing in the January 2004 issue of the Economic Journal, Professor Mark Gersovitz of The Johns Hopkins University and Dr Jeffrey Hammer of the World Bank develop another role for economists in understanding the behaviour that leads to infections and the optimal design of policies to mitigate their spread. They integrate economists'' concepts of rational choice and externalities with classical mathematical epidemiology. By doing so, they produce a behavioural basis for understanding how diseases spread and how to design optimal policies to mitigate them.

Other economists have used economic notions of behaviour to look at some aspects of one specific disease, HIV. By contrast, this paper sets out a general strategy for looking at many different types of infections:
· It looks at both prevention and therapies, how they should form a coordinated package and how governments should affect their costs.
· It looks at diseases that are spread from person to person and ones that are spread by vectors such as mosquitoes.
· It looks at infections from which people recover to be again susceptible, recover to be immune, or die.
· And it looks at the role of targeting, for example, whether therapies are given to only the infected or to all people.

The approach is firmly grounded in traditional public economics and uses the economic distinction between the outcome when a hypothetical benevolent social planner makes all choices and the outcome when all choices are made by private individuals without any government intervention at all. The discrepancy between these two outcomes defines the scope for policy. In the analysis of this paper, one discrepancy between private and social choices, and the associated scope for policy, arises because individuals disregard the costs to others of their being infected and infectious. This pure infection externality provides one motivation for policy toward infectious diseases.

For example, if people recover to be again susceptible, this externality suggests that both prevention and therapies should be subsidised at the same rate, as people ignore equally the benefits to society from their keeping out of the pool of infectious people (prevention) and the benefits from their getting out of the pool once infected (therapy).

In the case of recovery to susceptibility, the equilibrium infection rate that arises from optimal levels of prevention and therapy decreases with the cost of infection, increases with the rate of interest (because health expenditures are in the nature of an investment) and may increase or decrease with increases in the price of prevention or therapies. On the path to this optimal equilbrium, the optimal amount of prevention and therapy may move together or in opposition, depending very much on the form of targeting that is followed.

The hope is that the framework of this paper will open the way to a behavioural epidemiology based on rational choice that can provide a realistic guide for policy. Despite the epidemiological detail incorporated in the analysis, however, the level of abstraction is probably too high to capture all the salient features of any specific disease that bear on public policy.

''The Economical Control of Infectious Diseases'' by Mark Gersovitz and Jeffrey Hammer is published in the January 2004 issue of the Economic Journal. Professor Gersovitz is in the Department of Economics at The Johns Hopkins University and Dr Hammer is at the World Bank.