The Economics of the Flu Epidemic--Posner

As Becker points out, the potential costs of a lethal pandemic are astronomical. The Spanish flu epidemic of 1918-1919 killed tens of millions of people, and because of the extreme mutability of the flu virus it is entirely possible that an equally lethal strain may re-emerge. True, the death rate would probably be significantly lower today because of improvements in medical care, but it might not be. The new virus might be even more lethal, or more people might be infected; in either event as many or even more people might die. The mutability of the virus can make existing flu vaccines completely ineffectual. Because the virus is airborne and has an infectious incubation period of several days (that is, a period in which a carrier of the virus is asymptomatic but infectious), a large number of people can be infected before the disease is even discovered and measures for preventing its further spread implemented. International air travel can spread the disease throughout the world in almost no time. The interesting economic issue, besides the costs inflicted by the disease, stressed by Becker, is the optimal response to the danger of a lethal flu pandemic. Ideally one would like to be able to calculate the expected cost of the pandemic and compare that with the cost and efficacy of the possible preventive and remedial efforts. The expected cost would be the cost inflicted by the pandemic discounted (multiplied) by the probability that, in the absence of preventive measures, that cost would be incurred. Unfortunately, that probability cannot be estimated. But since we experienced such a pandemic less than a year ago, the probability cannot be considered trivial. Since the potential cost if such a pandemic does occur is so enormous, efforts at prevention or mitigation deserve serious consideration. If, following the Lancet estimate discussed by Becker, we guess that a repetition of the 1918-1919 pandemic would inflict a total cost worldwide of $20 trillion (this estimate excludes the narrowly economic costs, but they would probably be lower, in part because thinning out populations can raise per capita incomes, especially if the very young and the very old, and poor people in overpopulated countries, are the principal victims), and if we indulge a further guess that there is a 1 percent annual probability of such an event, the annual expected cost would be $600 billion. Of course this would not imply that the world should spend $600 billion a year on trying to prevent, or reduce the costs of, a lethal flu epidemic. Costs and benefits have to be compared at the margin. The marginal benefit of additional expenditures on preventing or alleviating the costs of a flu academic is probably zero after a few billion dollars of expenditure. Indeed, it could be negative, because large expansions in the number of research personnel working on vaccines against lethal airborne diseases increase the number of people who have the skills required for bioterrorism--a concern to which I return later in this comment. On the prevention side, the most important measures are (1) global early warning systems and (2) the development of very broad-spectrum flu vaccines, that is, vaccines that provide protection against possible mutant forms of the virus. Neither of these preventive approaches are terribly expensive. Of course, one could spend unlimited amounts of money on vaccine research, but this would be inconsistent with the marginal principle: the returns to additional resources on developing a vaccine that would protect people against all possible mutations of the flu virus probably diminish rapidly. Crash programs have limited efficacy in solving deep scientific puzzles. On the response or remediation side, expansion of hospital facilities and arrangements for large-scale quarantining should be considered, although here the costs are likely to become prohibitive quite rapidly. For example, there are fewer than one million hospital beds in the United States; imagine how much it would cost to expand this number tenfold in order to be prepared for a major epidemic--yet even a tenfold increase would accommodate only about 3 percent of the U.S. population. Analysis is complicated and the prospects darkened by the threat of bioterrorism. The flu virus, like the smallbox virus, lends itself to weaponization; both viruses are airborne and have significant infectious incubation periods. Smallpox is more lethal than any known flu virus, including the 1918¬¬-1919 virus, the death rate (as distinct from number of deaths) fron which was very low. But increasing the lethality of a virus, and also modifying it to make existing vaccines ineffectual against it, are well within the current state of scientific knowledge, and require only modest technical skills and inexpensive manufacturing facilities. Optimal responses to pandemics, whether natural pandemics or ones contrived by terrorists, are complicated not only by diminishing returns, but also by the multiplicity of catastrophic threats. Even if multiplying the number of hospital beds tenfold could be a justified measure in preparation for a possible lethal flu epidemic, it would be immensely costly and this would as a practical matter preclude financing measures directed against other catastrophic possiblities, which include abrupt global warming, asteroid strikes, biodiversity depletion, nuclear terrorism, and (as we have become acutely aware) global depressions. We need an overall "catastrophe budget" that would match expenditures to the net expected benefits of particular measures targeted at particular catastrophic threats.

Comments

[Marco Moreno]

Mr. Posner
If you think the Economy is the organization and administration by home, the Global Economy should be "the organization and administration by the World" With great interest in Health, Education and Welfare of all mankind. Mr. Posner it's possible!
Congratulation for your book A Failure of Capitalism.
You are a great and honest person

[runescape accounts]

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[IPHF]

Dateline: Nigeria, Abuja, May 04 2009 3:15PM.

Press Release:
IPHF warns against politicizing and sensationalizing of the H1N1 Virus

Dr. Francis Ohanyido the President of the International Public Health Forum (IPHF) has warned the media and public officials to be careful about the way they portray the H1N1 virus aka ‘swine flu’. Answering questions on the evolving pandemic in Abuja yesterday, the IPHF boss admonished against unnecessary sensationalism of the issue by the media and advised journalists to give the public accurate information that can assist in mitigating the spread. He also reacted to statements by public officers like US Vice-President Joe Biden that was credited to have advised Americans against some forms of transportation. He advised that whenever possible notable figures should endeavour to have a perspective of WHO’s global and public health posture on such issues before making categorical statements.
The Forum is wholly in support of the direction, drive and leadership of the WHO, and agrees with Keiji Fukuda, Assistant Director-General of the UN Health body the epidemiological picture is still evolving and heightened vigilance and improved reporting structure is critical, especially in view of the sustained human transmission that has so far been seen particularly in Mexico and other countries. He further advised that the term H1N1 should be used rather than the ‘swine flu’ which is to some extent misleading a lot of people into the impression that the flu is actively being spread by pigs or circulating amongst them. In this sense, he reiterated that the case is not exactly the same as experienced with the H5N1 (‘Bird flu’).
Ohanyido further called upon countries challenged by resources to make great effort to ensure that a pandemic response system in line with WHO recommendation is in place, so as to reduce possible cost profile in the case of a wider pandemic escalating to Level 6.
http://www.prnewsnow.com/members_area/rss.php?cid=264907

[neilehat]

Everyone seems to be of the opinion that pandemics and epidemics are a bad thing. Both due to the tragedy of the loss of life and their potential economic impact, etc.

I'm going to propose just the opposite. Actually, they (pandemics/epidemics) may well be a good thing. From nature's standpoint there is the immutable Law of "Carrying Capacity" that applies to any Eco-system. Such that, once that Capacity is exceeded, the eco-system collapses and with it, population density. Bringing the population back into line with Carrying Capacity for that Eco-system. This is somewhat Malthusian in perspective. As for those psky pandemics and epidemics, they may be doing us a favor by helping to reduce the population density on the planet. This place ain't known as Spaceship Earth for nothing.

Bearing this in mind, we may not want to develop prior response actions to pandemics. Utilizing valuable resources that are desperately needed to supply the exponentially growing population.

[runescap gold]

Just wanted to say HI. I found your blog a few days ago and have been reading it over the past few days.

[Jack]

Neil? Are you in a negative mood? It's not the numbers that ruin the eco-system but how much scare or polluting resources are consumed/wasted per individual. As for birth rate, it looks as though the best thing is a nation of high median income. Note that the US and most of Europe (and now China) aren't even reproducing themselves with all of the population growth coming from immigration.

We're at least TALKING about lessening our carbon and other footprints on earth and actually doing something here and there as well. Per capita energy consumption in CA has been flat for a decade or more. And hey! perhaps a new generation of cars (and less corruption in DC?) and we could go back to eating corn flakes and tortillas instead of trying to power our 3 ton "personal transportation" with corn.

But let's consider what you suggest in your dark mood: I guess this flu has a good basic design as it apparently kills more kids than old folks. For your purposes it's best to kill 'em off early, right? before a too many resources have been wasted? And if earlier is better and nature produces too many, it would seem the abortionist would be something of a hero? Does Hitler's approach figure in as well?

I guess the random, "luck of the draw" of pestilence is better, though my guess is it would skew to poorer folk who use less resources? Wouldn't you want something that would pre-select those likely to build massive homes, buy twin engine yachts and drive big cars and motor homes?

BTW........... a much more seriously; I never really understood the role of Social Security as a young man until I spent a year in Korea.

There, "social security" was having five or so healthy children with the hopes of perhaps one becoming wealthy, or, at least that the five might eke out enough to support surviving parents in their old age along with saving a fairly high percentage of a small salary. Many liked to gamble too as hitting a jackpot was the ONLY way out of a tough existence. Kinda sounds like the US today with our lotteries and pandemic of casinos?

Nah.......... becoming fairly wealthy and averaging just two kids per couple ---- a bit late in life so as to avoid overlapping generations seems a lot better.

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