Epidemics and Public Goods

from Business and policy through an Economist’s Lens at http://bit.ly/1xgIbhA on December 31, 2014 at 06:18PM

In a recent article about Ebola in the Wall Street Journal, Peter Piot, the Director of the London School of Tropical Medicine & Hygiene, referred to epidemics like Ebola as what economists refer to as a public good.  For most readers of the Wall Street Journal, I’d imagine that the economic definition of public good might be familiar.  It might not be for most of those interested in public health but without economics and business training. 
Public goods have two key characteristics: being non-excludable and non-rival.  Non-excludable means that it is impossible to keep someone from experiencing it.  Non-rival means that one person’s experiencing it doesn’t limit another person’s experience.  National defense has characteristics of a public good—everyone in a country experiences it and my enjoyment of the United States’ national defense does not limit anyone else’s experience.
So, an epidemic does have these characteristics—everyone gets to experience the risk and no one is excluded from the exposure to the risk.
While the epidemic has characteristics of a public good, some solutions do not have elements of public goods but instead have externalities.  For example, for a vaccine, if I get the dose no one else can have it.  But, when I get the dose, my protection also provides some amount of protection for those around me.
The funding of public goods comes at the public expense and there must be a way to determine how much of the public good the public desires.  Externalities imply that individuals will either overconsume (in the case of negative externalities) or underconsume (in the case of positive externalities like a vaccine) the good without some type of incentive or enforcement.   
Within national borders or provincial borders within a country, it is possible to have laws that encourage or require specific behaviors, to provide monetary incentives,  or to coordinate activity through a Department of Ministry of Health.  Economists would ask about the costs and benefits of such rules or coordinating efforts.  When the epidemic is within borders the power to regulate, incentivize, and enforce is clear. 
When the epidemic is actually an international pandemic the situation is more challenging.  There is no authority that has the same type of legislative role or public health coordinating role internationally as a government within a province or nation.  As a result, efforts at coordination are, of necessity, more voluntary. 

Given the risks of the emergence of new infectious diseases and the resurgence of old ones, this is a time to consider how best to develop international cooperation for to deal with future international epidemics.  Someone may find a way to provide incentives across countries that are enforceable and that lead to better coordination and appropriate amounts of action.  If not, this is an opportunity for those who want to conduct business (and run countries) with humanity in mind to think carefully about how to encourage stakeholders to act not just with local or national humanity in mind, but with all of humanity in mind.