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Written by Dr Flavio Toxvaerd

Thought experiments - can economic models help disease control?

In the second of our series on economics and epidemiology, Dr Flavio Toxvaerd provides different thought experiments to show how economic thinking applies to disease control.

Image by Steve Buissinne from Pixabay

In The economics of infection, I have asserted that epidemiologists doing infection control are routinely engaging in economics, and we should look at a few thought experiments that make this clear.

Consider the issue of vaccination. A central concept in public health is that of herd immunity, namely the idea that when a sufficiently large fraction of a population is inoculated against an infectious disease, the population as a whole is better protected against the disease because the immune individuals no longer serve as carriers or spreaders of the disease, therefore being unable to infect at-risk individuals. The concept of herd immunity is by no means alien to an economist, although the biological context in which it appears may be. The idea that the actions of individuals can have positive or negative repercussions on other individuals is known to economists as an externality, perhaps most famously formulated in the context of pollution. An individual that does not factor into its calculations the negative effects that its actions may have on others, is said to exert negative externalities on the population. Economists have not only studied the nature of externalities for many decades, they have also thought very hard about how to best deal with such effects through different policy interventions. One well-studied policy intervention is to use so-called Pigouvian taxes and subsidies to entice individuals to factor in their externalities in the decision making.

Next, consider the following thought experiment. Suppose that a large pharmaceutical company approaches the country’s health authorities with the offer of a new wonder drug. This drug has no appreciable side effects and completely and permanently cures some widespread infectious disease. The catch is that the drug comes with a considerable price tag, say £500 per individual in the infected population. What should the health authority do? Should it jump at the offer and permanently eradicate the disease, or should it pass on this opportunity and use the funds for some other worthy cause? You may think that this question is intrinsically immoral. When the means to eradicate a disease exist, surely only a callous monster (or an economist) would think twice before going ahead with eradication?

For others, the answer to this hypothetical question will likely depend on which infectious disease was imagined while reading the thought experiment. For infectious diseases like HIV or malaria, most would reasonably conclude that £500 is a modest price for eradication. Yet most would likely agree that if the disease in question is athlete’s foot, a minor irritant to sufferers, then the £500 price tag is simply too steep. What then, are we to make of these two extreme choices? Again, any economist would readily recognise that the thought experiment presents us with a trade-off between the benefits of eradication on the one hand and the cost of eradication on the other, the latter perhaps in terms of other worthy causes that go unfunded. The situation described in the thought experiment is not simply a case of economist’s sophistry, but reflects the situation that health authorities routinely find themselves in. Organisations such as the National Institute for Health and Care Excellence are predicated on the idea of providing value for the public’s money and thus must trade off the value of different uses of public funds. Again, this is simple economics and there is no reason not to be clear about this fact. And there is no reason not to listen to those who have made that kind of thinking their area of expertise.

Trade-offs and externalities are central to economists’ thinking about many important issues and have accordingly found application widely outside the field. So, I will close by pointing out a more subtle way in which economic thinking can be useful for analysing public health interventions. This is in the domain that can be called “micro-macro” interactions. One distinguishing feature of communicable diseases in humans is that humans often make active decisions that influence their susceptibility to different diseases. They decide whether to use public transport, whether to engage in risky sexual behaviour, whether to get a flu jab and whether to seek treatment once infected. But this means that in order to fully understand how an infectious disease propagates in the population, we must understand not only the preferences, constrains and incentives of individuals at the “micro” level, but also how these are influenced by the aggregate evolution of the disease at the “macro” level. To better understand micro behaviour and macro disease dynamics, we must better understand how these two levels of analysis interact. On the one hand, an individual’s incentives to engage in protective behaviour depend on the risks the individual faces, which in turn depend on aggregate quantities such as population-wide disease prevalence. Thus, the macro influences the micro. But how is the macro determined? What determines the number of infected individuals in the population? Well, it is a function of what each individual does to protect him or herself. In other words, the macro depends on the micro.

This feedback between the micro and macro levels of analysis turns out to be a central concept in economics, although usually applied to other contexts. For the micro level, the economist will study the behaviour of individual firms and consumers while at the macro level, the economist will look at aggregates like overall economic growth, unemployment rates and international trade. But conceptually, the intellectual exercise is much like the one faced by public health professionals and epidemiologists seeking to control an epidemic outbreak.

In my own research on economic epidemiology, I have found a number of surprising results that may at first seem counter-intuitive but upon some analysis and reflection, turn out to make good sense. In previous work, I have considered the difficult issue of behavioural disinhibition in which the introduction of pre-exposure prophylaxis can make everyone in society worse off by essentially reducing each individual’s incentives to engage in protective behaviour. I have shown that such drugs may lead to an increase in disease prevalence and reduce social welfare.

In more recent work, I have revisited the issue of herd immunity and applied the apparatus of game theory and dynamic optimisation techniques to determine when and how herd immunity should become an explicit policy objective and have used this analysis to inform public policy towards diseases such as seasonal influenza.

Economic epidemiology is an active and important field of cross-disciplinary inquiry that those interested in infectious diseases, whether from a scientific or a public health perspective, may benefit from.

  • About the author

    Dr Flavio Toxvaerd, Visiting Fellow 2018-19

    Dr Flavio Toxvaerd is a University Lecturer at the Faculty of Economics, University of Cambridge and a fellow of Clare College. He holds degrees from the University of Copenhagen (BSc Economics, MSc Economics), the London School of Economics (MSc Econometrics and Mathematical Economics) and the ...   Learn more

    Flavio Toxvaerd