On Twitter, Republican congressman Dan Crenshaw (pictured above) writes:
How about don’t knock on my door. You’re not my parents. You’re the government. Make the vaccine available, and let people be free to choose. Why is that concept so hard for the left?
University of Michigan economist Justin Wolfers gives a two-word answer:
Because externalities.
But that’s not enough.
I debated Justin in April 2020 about lockdowns: he favored them and I opposed.
In the debate, though, he made an important point about externalities that did affect my thinking. He pointed out that the standard law and economics solution to a negative externality is to have the “least-cost avoider” bear the cost of adjustment. I discuss what I learned from that here.
There’s a related point. Now that vaccines in the United States are widely available at a zero price and highly effective, who are at the lowest risk? The people who are vaccinated. They face very little risk–on the order of the risk from catching the flu in a normal flu year–whereas the unvaccinated person faces a much higher risk. So the people who should bear the risk are those who, for whatever reasons, don’t get vaccinated. And they should, as Crenshaw says, be allowed to bear the risk.
You can’t just say the word “externalities” and win an argument.
READER COMMENTS
Grand Rapids Mike
Jul 7 2021 at 8:12pm
“Externalities” The new buzzword for reppressing freedom. Who would of thought that economics is the science of suppression. Marxism has found a new tool.
Matthias
Jul 9 2021 at 7:08am
Marxism is bad, but not everything that’s bad is Marxism.
Jon Murphy
Jul 7 2021 at 8:42pm
And even that’s assuming that a Pareto-relevant exchange exists and that the parties involved failed to properly estimate the costs and benefits of such an exchange and that they should have known better.
David Seltzer
Jul 8 2021 at 2:41pm
Jon said, “And even that’s assuming that a Pareto-relevant exchange exists and that the parties involved failed to properly estimate the costs and benefits of such an exchange and that they should have known better.” Question; In the case of externalities, it’s probable, I think, not all relevant costs and benefits are incorporated in market prices. If externalities distort relative prices in an economy, wouldn’t allocation of resources and consumption not be pareto efficient? Please bear in mind I’m just learning about this stuff.
Jon Murphy
Jul 8 2021 at 7:54pm
You are correct. By definition, an externality means that the market price is too low (in the case of a negative externality) or too high (in the case of a positive externality) because some costs (benefits) haven’t been fully incorporated into the price.
The distribution may not be Pareto-optimal. The terminology (which I steal from James Buchanan) I use is Pareto-relevant: that some exchange exists where both parties benefit (or, at least, one party is not made worse off).
In a world of transaction costs (that is, the costs of finding and securing an exchange), the mere fact that some cost is imposed on a third party does not mean there is some alternative that makes all parties better off exists (in technical language, there is not necessarily a Pareto-relevant exchange). If the transaction costs are significantly higher than the benefits, then trying to fix the externality would make at least one party (maybe both) worse off. This would be a Pareto-irrelevant exchange.
If, however, the transaction costs are too high for individuals to bargain, but there exists some alternative (say, government) which could help lower transaction costs so that both parties can benefit, then there is a Pareto-relevant exchange.
My point is that the solution of having the least-cost avoider pay assumes there is a Pareto-relevant exchange.
Does that make sense? Would you like a numerical example?
David Seltzer
Jul 8 2021 at 9:50pm
Jon, your explanation of least-cost avoider and Pareto-relevant exchange makes sense. Thanks. Do we ever achieve Pareto optimality in dynamic markets or is it more a matter of approaching it as theoretical limit?
Jon Murphy
Jul 9 2021 at 6:33am
I don’t think general Pareto-optimality (that is: a situation where there does not exist any trade that can make someone better off without making anyone else worse off) ever truly exists given the instantaneous nature of the world.
Nicholas Decker
Jul 7 2021 at 10:15pm
C’mon though. Some people can’t get the vaccine, because they’re immunocompromised or allergic to some of the ingredients. They are being made to bear the costs of those who refuse to get vaccinated.
MarkW
Jul 8 2021 at 8:09am
But those rare individuals who are so immunocompromised that they cannot tolerate vaccines are always in risk of infection from a variety of pathogens and have to take great care generally (as do, for example, those with potentially deadly nut allergies). And they’re still the ‘least-cost avoiders’ because their numbers are very small relative to the overall population.
HH
Jul 8 2021 at 3:26am
Second Nicholas Decker.
Kids can’t get the vaccine. Allergic people can’t get the vaccine. Immunocompromised people may but be able to get the vaccine. Some people don’t develop antibodies properly. Even more don’t develop appropriate T-cell memory. All of these people are put at risk they can’t avoid because some people don’t want to take the low-cost action of getting vaccinated.
You can’t just deny obvious externalities and think you’ve won the argument.
Jon Murphy
Jul 8 2021 at 7:01am
Nobody’s denying anything. All David is saying is that, Pareto-relevant externalities are present, the least-cost avoider should pay the cost of reducing the externality. In this case, the likely least-cost avoider are the vaccinated, not the unvaccinated partly for the reasons listed by you and Nicholas Decker.
In response to Crenshaw’s question on why vaccines must be mandatory, Justin Wolfers simply responded “because externalities.” David pointed out that “externality” is an insufficient justification for mandatory vaccinations. One would need to show that mandatory vaccination is the least-cost alternative.
HH
Jul 8 2021 at 7:40am
Ok, you can also ignore the dangers to those who want to be vaccinated but can’t – there’s a helpful list in the comment you’re responding to – and then sure, you might have a point.
Jon Murphy
Jul 8 2021 at 7:59am
I am one of those who want to be vaccinated but can’t. But again, pointing out that they are not the last-cost avoider here is not ignoring them.
Daniel
Jul 9 2021 at 7:59am
There is a small chance that someone could become a host for a mutation that breaks containment and puts us back in 2020, but the real relevant externalities here are between those who are unvaccinated-by-choice and those who are vaccine-unable (Patrick Tehan elsewhere in the comments is correct on this). The vaccine-unable are literally not able to avoid the externality at any cost, so we can’t just compare costs and raise our hands in victory. It becomes a question of first assigning property rights to determine who gets to be paid off as compensation. The vaccine-unable are taking a higher chance of getting covid (even assuming all reasonable actions to reduce the base risk, the externality is that the effective risk is higher because of the unvaccinated), so the unvaccinated-by-choice ought to be paying to compensate. OR, the vaccine-unable ought to be paying people to get vaccinated. Which cost (remember, the group sizes are unequal too) is lower? What if Coasean bargaining weren’t really achievable because enough people won’t get the vaccine at any price?
Jon Murphy
Jul 9 2021 at 1:01pm
That’s not true. There are countless ways: stay at home, wear a mask, remain in open air, social distance, etc.
Daniel
Jul 9 2021 at 3:05pm
I regret saying that because it was unclear and unimportant to my main point. You can assume a vaccine-unable person is taking all reasonable steps to avoid the creation of the externality, and it will still crop up from time to time (e.g., the rare grocery store visit, etc. At some point you can just tell them to stop living any semblance of a normal life and I’d say you probably left the realm of reasonable possibilities and they’re experiencing the externality).
Or put another way, assume like David does that an externality exists. The least cost avoiders are not the vaccinated (they’re not experiencing/creating the externality!), and it’s debatable about whether it’s the vaccine-unable or willfully-unvaccinated.
Jon Murphy
Jul 9 2021 at 5:02pm
You’ve lost me
Daniel
Jul 9 2021 at 6:52pm
Imagine a rail line going behind a farmer’s house and an apartment building. The line causes spark to fly in this area, which threatens to burn up the farmer’s crops and does nothing negative to the apartment residents. The rail line could repair the rail going in that area, or the farmer could replant their crops elsewhere on their land.
1) The externality exists because of the rail company and farmer. Similarly, the willfully-unvaccinated are the rail company, the vaccine-unable are the farmer, and the vaccinated are the apartment residents. It’s about the willfully-unvaccinated and the vaccine-unable, contra David.
[2) This is a side-point. In the example, either reasonable action by the rail company or farmer avoids the externality. In the vaccine situation, the unvaccinated are not really able to return their risk to baseline, i.e., they’re not really able to avoid the externality. But this is a minor quibble that doesn’t change the more important points 1 and 3.]
3) Should the rail company or farmer be the one to take the avoiding action? The least-cost avoider should because it reduces the amount of total resources needed to address the problem (efficiency!). HOWEVER, and this is where the debate comes in, depending on how property rights are assigned, one party or the other may bear the cost. The farmer can replant the crops for cheaper than the rail company can repair the tracks, so the farmer should do that. But if the legal setup is such that the farmer can successfully sue for the cost of the replanting + legal fees (or worse, to win injunctive relief in the form of not replanting at all and forcing the company to take the mitigation route), the company will bear that cost. Rather, what you’d probably see is Coasean bargaining to where the farmer is made whole and the company doesn’t have to waste money on lawyers – “we’ll reimburse you for the cost of the replanting plus a little.” On the other hand, if the legal setup is the such that the rail company cannot be forced into any of that, the farmer will not pay for the more-expensive mitigation and will instead bear the cost of replanting. In the vaccine situation, no one has provided a good accounting of the relative costs (which is costlier – the vaccine-unable never having a normal pre-COVID life again or the willfully-unvaccinated doing something they are uncertain about?).
—And even if one were provided, we could further debate how the property rights ought to be assigned to force one party or the other to bear the least-cost. Again, just because the least-cost action is preferable for efficiency does not mean the person taking that action must bear the cost of that action, contra David.
Jon Murphy
Jul 9 2021 at 9:59pm
You’re not really identifying the relevant externality, though. That’s the problem I think. The externality is between the vaccinated and the non-vaccinated because that’s the argument for vaccinations used by Wolfers.
MarkW
Jul 8 2021 at 8:12am
Kids can’t get the vaccine.
Kids don’t need the Covid vaccine, since Covid is less risky for kids even than the seasonal flu and yet nobody has ever proposed that we should send government agents door-to-door to make sure everybody has had their annual flu vaccine.
HH
Jul 8 2021 at 3:36am
Forgot to add: every new infection is a potential source of a new variant that can escape existing immunity. How’s that for an externality?
Knut P. Heen
Jul 8 2021 at 7:14am
That is an argument for vaccinating bats.
HH
Jul 8 2021 at 7:42am
We would if we could, I bet. We already vaccinate or otherwise manage a lot of wildlife to reduce spread of diseases that can jump to humans. The fact that it’s can’t cheater to vaccinate humans than bats probably features in this discussion of costs, though.
Jon Murphy
Jul 8 2021 at 7:30am
In that particular case, it’s not clear there’s a Pareto-relevant externality (that is, some means of internalizing the cost of the externality that makes everyone better off). As Knut points out, that would mean needing to vaccinate every single potential animal carrier out there: bats, cats, dogs, birds, camels, etc. Furthermore, one would need a vaccine that is 100% effective, as something that is even 99.99999999999% effective still would create a potential source of a new variant since a vaccinated person could get infected. In your propose case, the costs of internalizing greatly outweigh the costs of simply dealing with the externality.
HH
Jul 8 2021 at 7:44am
No vaccine we have is 100% effective and several of them have driven diseases to extinction, because your don’t need that level of perfection. The fewer potential sources of variants, the fewer variants (ceteris paribus).
Jon Murphy
Jul 8 2021 at 8:03am
I’m going off your logic. I agree that one can effectively eradicate a disease (though not entirely). But note that the diseases that have been largely eradicated have human-only reservoirs. No disease with non-human reservoirs have been eradicated. Evolution does its thing.
But again, all that is largely irrelevant. Even given the potential for increased variations, forced vaccination is not likely the least-cost alternative here.
MarkW
Jul 8 2021 at 10:14am
Forgot to add: every new infection is a potential source of a new variant that can escape existing immunity. How’s that for an externality?
But that is the case for every bacterium and virus that infects humans. It’s even the case for domestic and wild animals from which a virus might jump. Would that justify governments requiring masks 24/7/365 for everybody whether during a pandemic or not (after all, our passing around of pathogens generates new variants as with the seasonal flu, which is never the same this year as last)? If not, why not? Would it be justified to ban the keeping of pets and institute strict regulations (hazmat suits?) for interacting with livestock on farms? Engaging in sexual activity with multiple partners is a longstanding incubator of nasty germs — would it be justified to ban sex outside marriage because of potential STD externalities? Mass gatherings in close quarters (parades, concerts, theatrical performances, conventions, protest marches, sporting events, etc) always have potential for spreading disease. Given the disease externalities argument, why should mass-gatherings be allowed at all, ever?
Where is your bright line for what government actions can and cannot be justified by ‘externalities’?
MikeP
Jul 9 2021 at 2:42am
every new infection is a potential source of a new variant that can escape existing immunity. How’s that for an externality?
That’s one perspective, I guess.
For my part, I think the massive worldwide experiment that has been performed, uncontrolled, on all of humanity has induced an externality beyond measure.
For the first time in the history of mankind, a respiratory virus was suppressed in the summer, when immune systems are strong and viruses are weak. As a result, many fewer people had the chance to catch COVID with light exposures outside, in crowds, and instead caught COVID inside as it surged in the winter, with much higher degrees of exposure.
We all know the most likely course of SARS-CoV-2: It will evolve, through variants, to be a fifth common cold coronavirus caught by children and conferring enough immunity that it will not be lethal to anyone left alive after its first few seasons.
But instead of the usual rapid evolution into more contagious, less lethal variants that marks the experience of respiratory viruses in mankind for millions of years, this coronavirus has seen that process severely altered by force and by fear.
You may say that the above is just a hypothesis. But every new infection is a potential source of a new variant that can become less lethal — as viruses tend to become — and the suppression of infection has slowed that process. The likelihood that the overall reaction to COVID has actually increased deaths, from COVID itself, above the count we would find in a less panicked reaction is not zero.
David Henderson
Jul 9 2021 at 1:08pm
Thanks, MikeP.
MikeP
Jul 9 2021 at 9:28am
every new infection is a potential source of a new variant that can escape existing immunity. How’s that for an externality?
That’s one perspective, I guess.
For my part, I think the massive worldwide experiment that has been performed on all of humanity has induced an externality beyond measure.
For the first time in the history of mankind, a respiratory virus was suppressed in the summer, when immune systems are strong and viruses are weak. As a result, many fewer people had the chance to catch COVID with light exposures outside, in crowds, and instead caught COVID inside as it surged in the winter, with much higher degrees of exposure.
We all know the most likely course of SARS-CoV-2: It will evolve, through variants, to be a fifth common cold coronavirus caught by children and conferring enough immunity that it will not be lethal to anyone left alive after its first few seasons.
But instead of the usual rapid evolution into more contagious, less lethal variants that marks the experience of respiratory viruses in mankind for millions of years, this coronavirus has seen that process severely curtailed by force and by fear.
You may say that the above is just a hypothesis. But every new infection is a potential source of a new variant that can become less lethal — as viruses tend to become — and the suppression of infection in the less vulnerable has slowed that process. The likelihood that the overall reaction to COVID has actually increased deaths from COVID above the count we would find in a less severe and coordinated response is not zero.
Andrew_FL
Jul 8 2021 at 9:02am
For me, the reason not to go knocking door to door on the unvaccinated is that they are very loudly telegraphing that doing so will not convince them. Why pursue a campaign to convince people in a way they tell you before hand they won’t respond well to?
Michael
Jul 8 2021 at 11:48am
Because “they” are not a homogenous group that speaks with one voice.
Jon Murphy
Jul 8 2021 at 1:09pm
Michael-
You’re right that they are heterogenous, but that doesn’t answer Andrew_FL’s concern. A door-to-door campaign inherently relies on the idea that there is a lack of information out there about the availability of the good/service. I doubt approximately 30-40% of the population is unaware the vaccine exists. They have chosen not to take the vaccine for one reason or another. Not understanding and not addressing their concerns will not convince them otherwise.
Michael
Jul 8 2021 at 10:06pm
No it doesn’t. Well, not exclusively, anyway. It also offers convenience (and immediacy) and information. I’m sure just about everyone knows the vaccines exist, but I doubt very much that everyone is well informed about it, and I also think that there are likely many people who would get vaccinated if it showed up at their door but not necessarily otherwise.
Jon Murphy
Jul 9 2021 at 6:31am
Except that’s not what the plan is. It’s literally going door-to-door cajoling people to get the vaccine.
Patrick Tehan
Jul 8 2021 at 2:00pm
The only way this is an externality for the vaccinated is if there are so many unvaccinated that overwhelm hospitals which affects the vaccinated who need to be treated for other ailments
Since this is highly unlikely to be the case, he sticks with the two word answer.
They want to keep believing that the unvaccinated can hurt them, I do not understand it
Matthias
Jul 9 2021 at 7:12am
Some people would like to get vaccinated, but can not do so for medical reasons.
They benefit from other people being vaccinated (or having survived an infection).
I don’t know what the value of this externality is. Nor whether those unable to vaccinated (but willing) shouldn’t just try to pay people to get vaccinated.
AMT
Jul 11 2021 at 9:35pm
You make a critical error in reasoning here. You seem to assume that the least-cost avoider of the externality (the unvaccinated transmitting covid to the vaccinated) is the person who is already at the lowest risk, but this is not supported. For it to be true, the already vaccinated would have to find the risk of getting sick from the disease, multiplied by the expected value of the harm from contracting it (giving us the total expected cost), to be less than the cost of an unvaccinated person getting the vaccine. The vaccinated probably aren’t going to do more to avoid the externality (the marginal cost probably exceeds the marginal benefit), so we assume they just bear the risk, which is their cost. We compare that to the cost of the unvaccinated getting vaccinated, which essentially eliminates (avoids) the externality. If the cost to the vaccinated is lower than the cost to the unvaccinated, it’s inefficient to mandate vaccinations.
However, even if the vaccines are extremely effective, say 95%, it is not a negligible probability that they can still contract covid, and for many people there is the potential for quite severe illness from the disease. I’m not old, so I have basically zero fear of dying from it, but I’d still rather not get extremely sick for a week or two (I know people in their 20s who were very sick for 1-2 weeks plus had serious long-term symptoms). So we can say this cost is a quite small probability of getting sick, multiplied by small/moderate expected harm.
Alternatively, you might say that the cost to the vaccinated person is to continue social distancing, wearing a mask, etc., which would essentially drop their risk of getting sick to 0% and therefore eliminate the externality. In that case, it would be unbelievably ironic to say that these ongoing sacrifices are not as bad as just getting the vaccine. They are clearly not even in the same ballpark…(and not just because the vaccinated would be obligated to stay out of the ballpark and continue social distancing to completely eliminate the externality. And sure, social distancing and other precautions don’t have to be all or nothing; they might take some calculated risks and mask up while at a game to end up somewhere between 5% and 0% chance of getting sick with covid if exposed.)
Contrast that with the cost of the unvaccinated getting vaccinated…which you already pointed out is entirely negligible. No monetary cost, nominal time costs and very limited possible side effects of the vaccines. (If you want to argue there is a monetary cost that is covered by the government, then I’d counter that if they refuse to get vaccinated then they can also bear the risk of paying for any medical bills they might end up with, rather than any medicare or medicaid coverage. If individuals were paying for the vaccine out of pocket it would still be quite cheap.)
So which of these is the least-COST avoider of the harm from the externality? It’s obviously the person that just needs to make two quick trips to their local Wallgreens.
It is very incorrect to say the unvaccinated should “be allowed to bear the risk” because they have the lowest cost. It’s exactly the opposite! The whole argument is about who should be forced to “bear the cost of adjustment” to have an efficient outcome! (or the vaccinated simply bearing the cost because further adjustment is more expensive than it’s worth.) The coercion is because there is a market failure resulting from the externality (getting others sick). As you even argue, the unvaccinated have the lowest costs!
You can’t just say the word “risk” and win an argument.
Robert T.
Jul 13 2021 at 12:33pm
Why were other alternatives to the mRNA vaccine not discussed? What about the more traditional vaccines such as Novomax, given the many negative side effects of the mRNA vaccines causing illnesses and even deaths? I realize that such side effects are rare but they seem to be occurring more frequently than for other vaccines. What about this established a drug Ivermectin used for decades? And what ever happen to herd immunity. Is building up one’s natural immunity system no longer an option and only a vaccine counts? What about blood tests that can detect if one needs the vaccine?
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