by Vincent Geloso
Vincent Geloso, senior fellow at AIER, is an assistant
professor of economics at King's University College. He
obtained a PhD in Economic History from the London
School of Economics.
News out of
Wuhan in China generated a wave of fears regarding the
spread of the coronavirus.
organizations issued guidelines on how to minimize risks of
infection and China's government took the drastic step of sealing
The story is unfolding in a manner very similar to
outbreak a few years back.
Authorities react with strong measures
such as quarantines and travel bans to restrict contagion.
On its face, such
measures appear - purely from the vantage point of public health
issues - reasonable.
However, economic theory suggests the
possibility that extreme measures such as sealing off a city, a
travel ban or quarantines may actually make things
First, it is
necessary to point that pandemics have, since the 19th
century, fallen in importance.
Emerging Infectious Diseases compared the
influenza epidemics of 1918, 1951, 1957 and 1968 in England, Wales,
Canada and the United States and found that death rates at each
outbreak kept falling relative to the previous one.
Using a longer time
horizon that has some uncertainties about case fatalities, a 2001
article in the
Journal of Applied Microbiology documents a
rapid collapse in influenza-related deaths (which when
combined with population figures suggests a faster collapse in death
Other articles find that,
since the 1950s, death rates from different strains of influenza
have stabilized at historically low levels in spite of the fact that
we live in a world with more travel, more exchange and more social
connections (i.e. more chances to transmit infectious diseases).
And these numbers
speak only to influenza.
Deaths from other forms of infectious
at historically low levels if
have not disappeared entirely. Thus, it is necessary to place
the current situation in a historical context.
This does not
invalidate the idea that there are serious costs from currently
estimates place this figure at
0.6% of global income which is not a trivial figure especially
in lower-income countries where the costs are more than twice as
quarantines and travel bans be problematic?
The answer is that it
all boils down to how people affected by the public health policy
responses perceive costs.
Consider the following thought experiment
constructed by Alice Mesnard and Paul Seabright in the
Journal of Public Economics
epidemics through migration? Quarantine measures under asymmetric
information about infection risk).
People who live
in areas with high prevalence of infectious diseases face costs in
the form of higher risks of infection.
Thus, the uninfected who
understand accurately their own infection status stand to gain from
migrating away. As a result, they implicitly quarantine the disease
and reduce the potential for contagion.
This is what Mesnard and
Seabright call "first best."
individuals at risk are uncertain of their infection status (i.e.
they either contracted the disease but are still unaware of it or
they are uninfected), their decision to migrate can allow the
disease to spread.
The hiccup comes from these individuals in that
setting of imperfect information.
If a quarantine is applied, those
at-risk individuals are stuck with the already infected.
increases their perception of costs and, by definition, lead to
investing more in trying to migrate.
If they are unaware that they
are already sick but manage to escape the quarantine area, they
spread the disease.
Thus, a quarantine that is too extreme induces a
behavioral response to more aggressively attempt to escape the
In the end, this may increase infection rates.
backfire of public health measures suggests the possibility that
milder measures might be cheaper and more effective in containing
For example, one article in
the Trip - Air Travelers' Behavioral Responses to Pandemic Influenza) studied purchased flights that were
missed by passengers in relation to news trends regarding infectious
In other words, the
people who missed their flights because they feared infections.
defensive move on the part of private individuals came at a cost of
$50 million over two years.
The same study found however that
sources were highly inaccurate in depicting actual infectious cases,
but people still responded to media reactions.
The authors of the
paper point out that had passengers responded to actual cases of
infections rather than news scares, the cost of $50 million could
have been reduced to half that figure.
This suggests that clearer
risk communication could improve people's understanding of their
constraints. As such, individuals self-quarantine themselves and
reduce the risks of contracting the disease.
provided above suggests that soft-handed measures are cheaper and
more effective in diminishing contagion than
This is something worth bearing in mind as news keeps unfolding
about the reaction of authorities in China to the outbreak of the coronavirus.