It seems an unquestionable orthodoxy in discussions of what can be done to limit the spread of COVID-19 that government policies have a central role to play. Economic research indicates, however, that this view has its limits; it does not take into account the private-sector incentives that can spread disease and mute government prevention efforts. Evidence suggests that after a disease is introduced into a population, some level of damage through the disease itself and the costs of prevention is unavoidable, and less influenced by policy than commonly believed.
Few would claim that non-communicable diseases, such as obesity, are spread or stymied primarily by government policy. Rather, private economic incentives drive many such diseases. In the case of obesity, such incentives include the falling price of calories caused by agricultural innovation and the widespread presence of sedentary work rather than manual labor.
Private-sector incentives have an equally important role in the spread of communicable diseases such as COVID-19. The main underlying incentive is that private prevention rises with disease risk—the more cases are around, the more precautions the uninfected will take to avoid infection. This common-sense principle is supported by a large base of economic evidence showing that private prevention rises with risk, as can be seen in everything from safe sexual practices in face of HIV to vaccinations for childhood infections.
When disease risk drives private prevention, government prevention such as regulations and subsidies for preventive behavior often have limited effect. Such interventions are often justified on the basis of "externalities"—the idea that preventing one person's communicable disease confers benefits to others (by reducing the disease's spread). However, this is an incomplete view. To better understand the impact of government on the course of a disease, it's necessary to look at how public policy interacts with private incentives for prevention.
In the short run, steps taken by the state may have much less of an effect than often assumed because individuals typically react more rapidly to disease risk than governments do. Governments can lock you down, but so can you—and more quickly—and that matters. President Ronald Reagan's late response to HIV and President Barack Obama's to H1N1 were illustrations of government lagging behind the private sector, and so were the early COVID-19 mandates. For example, restaurant attendance was already down on average by about 85 percent in early 2020 by the time some states banned it. Research from the University of Chicago confirms this overall pattern of a quicker private than public response to COVID.
The limited reach of public policy often holds true in the long run as well. Because more disease incentivizes individuals to protect themselves more, we see cycles of rising and falling case rates. Prevention falls off as the risk of infection subsides, and a rise in cases follows. New outbreaks prompt people to take more care, and cases fall again. But this means that if government policy drives down cases temporarily, as was the case in March 2020 following federal guidance and state-mandated lockdowns, private prevention measures will tend to slip, leading to the disease's reemergence—as we have seen in multiple waves of coronavirus outbreaks in the U.S, and abroad.
Thus, in the long term, public prevention has less of an effect than might be hoped because of the way that it "crowds out" private prevention. The same is true of top-down private prevention efforts at schools or companies, even if they succeed in lowering overall disease risk in a community for the immediate term. The bottom line is that the demand for prevention by some leads to less prevention by others, which can offset large-scale private or public efforts to limit a disease.
These patterns have important implications for evaluating various policies meant to address COVID-19 and other communicable diseases. It is naïve to argue, as is often done, that if the U.S. had simply responded more quickly with testing and tracing, we would have escaped damage from the pandemic. This is because, with an initial low prevalence, little prevention takes place, allowing for rapid growth of the disease later on.
Therefore, COVID-19 would have spread regardless of initial attempts to test and trace, unless our large country had succeeded immediately in complete domestic eradication of the virus—an unrealistic goal which no country has yet accomplished. Indeed, if initial attempts to test and trace had been successful, no one would have been incentivized for private prevention, opening the floodgates wide for subsequent disease growth. Claims by public health officials such as Dr. Deborah Birx that much of COVID-19 could have been prevented by better government policies are unsupported by evidence about how diseases spread. Indeed, evidence shows that the total damage of COVID-19, accounting both for infections and the costs of prevention, was below the global average in the U.S.
The tendency of public policy to crowd out private prevention is exemplified by island countries where public restrictions on immigration and lockdowns saw short-term success. Private demand for vaccines in these countries has been very low—as of this writing, 11 percent in Australia and 15 percent in Indonesia. Their initial success at keeping cases low turned out to be a handicap in motivating citizens to vaccinate. As a result, Australia could still be "locking down" in 2022 and beyond.
Of course, this does not mean that the government cannot have a useful role in preventing communicable disease. First among its priorities should be to guard against introducing new diseases into a population. Second, disease surveillance may well benefit from economies of scale, as governments can help the public obtain accurate information about the aggregate prevalence of diseases and assess the possible public risk of certain prevention efforts.
But policymakers need to better understand how their efforts interact with private-sector incentives that drive disease. Private citizens, not just governments, have aimed to stop COVID-19, and their efforts impose limits on the effectiveness of government mandates alone.
Casey B. Mulligan and Tomas J. Philipson are economists at The University of Chicago and both served at the White House's Council of Economic Advisers, Mulligan as its chief economist from 2018 to 2019 and Philipson as a member and its acting chairman from 2017 to 2020.
The views expressed in this article are the writers' own.
