With the mass of options presented to policy makers, the task of sorting out priorities can seem overwhelming. So, how to do it? A simple answer from economics is to intervene when people don’t have the incentives to do the right thing.
And when it comes to contagious disease, this happens a lot. Some personal examples: I get my flu shot each year to reduce the chance that I or anyone else in my household gets sick. But, in doing so, I also reduce the chance that you get sick. Did you pay me for that? I think not. Similarly, when I dump out the water from my daughter’s buckets in the backyard, fewer mosquitoes will bite my fellow Chicagoans, which hopefully reduces the chance that the West Nile virus will return.
Preventing the spread of communicable disease is a public good. In standard economic analysis, there is a role for some big entity to take actions that reduce the transmission of disease. Control of tropical disease, whose economic costs I discussed in this post, falls into this category.
Bearing this in mind, what about alternative schemes for setting priorities?
Hello, DALY? The medical community often acts as if the goal of public policy were to reduce the so-called Disability-Adjusted Life Years (DALYs) lost to disease. But there is little economic rationale for lumping all these kinds of sickness together. Consider two cases: (a) you are sick because of a choice that you made (for example, overeating for thirty years) or (b) you are sick because of a choice that someone else made (for example, not dumping out buckets/mosquito-nurseries, which caused you to get West Nile). In case (a), you have darn good incentives to balance the benefits of overeating (more yummy milkshakes) with the well-known health costs. Case (b), on the other hand, is screaming out for an intervention. Your stagnant-water-tolerating neighbor does not take into account the effect of his bevahior on you. This is what economists call a market failure. Judging interventions by their effect on DALYs is not using the right yardstick, because some DALYs come from market failures and others are a by-product of optimal choices.
Decentralization. The fashion of recent decades has been to avoid centralized public-health campaigns in favor of decentralized interventions in health. Local, primary-care clinics are an example. This sounds nice in principle—close to the people, et cetera—but what spillover does it address? To some extent providing health care helps reduce disease transmission (like my example of the flu shot above), but much of the care given treats things for which there is no great spillover. If you have a headache, you have all the right incentives to make a good decision re: the purchase of an aspirin; no intervention should be required.
An entirely different problem with these small clinics is that it is very difficult to know what care—if any—is actually being given. The service in such facilities is notoriously bad, and oftentimes the doctors and nurses simply do not show up to work.
This highlights another constraint in setting priorities: corruption. Any policy has be filtered through problems of misgovernance that are so common in many developing countries. The less the intervention is susceptible to corruption, the better. This is yet another advantage of targeted, ‘big push’ campaigns, which are comparatively easy to monitor. (Technical feasibility is nevertheless a real issue.)
Now that I’ve given you some cases, let me step back and talk ‘framework’ for a second. There are two standard justifications offered by economists for policy interventions:
- Efficiency, or Make Markets Work Better. (This is what I was referring to above.) This argument makes sense if there is something that currently prevents markets from working correctly, for example a spillover (cough cough) or a public good (fewer mosquitoes transmitting disease). In principle, these can be corrected by putting a price on the spillover or coordinating our actions to create the public good.
- Equity, or Transfer from the Rich to the Poor. This is more a question of taste than science. Most people would prefer to compress the distribution of income, but by how much varies across people by a wide range, running from Robin Hood to Scrooge (pre-haunting).
We usually confront a tradeoff between these two: for example, the income tax redistributes but distorts the incentive to work for high earners.
Providing public goods that particularly help the poor, on the other hand, is a ‘double play’: we get more equity and more efficiency with the same intervention. Controlling the spread of diseases that afflict the poor is just such a double play.
