Covid-19 Vaccines and Cost-Benefit Analysis
The small risk of Covid-19 vaccines has translated into serious side effects in a number of cases. A few people even died. In the U.S. and elsewhere, governments are preparing to pay statutory “compensation” to the victims or their survivors. (“Covid-19 Vaccines Were Deadly in Rare Cases. Governments Are Now Weighing Compensation,” Wall Street Journal, February 19, 2022.)
Aren’t these costs low compared to the benefits of vaccination, as some cost-benefit analysis might have shown (had governments done any such analyses)? This question raises the basic problem of cost-benefit analysis: it aims at calculating the benefits to some individuals compared with the costs to other individuals.
The intellectual exercise of cost-benefit would be innocuous if the purpose were to inform each individual of his own risk. But then, isn’t this presumably what each individual does before making a decision: he weighs his own expected (ex ante) costs and benefits. Government economists cannot really calculate costs and benefits that they are largely subjective, dependent on individual circumstances, and unknowable by any external observer (see James Buchanan, Cost and Choice  [Liberty Fund, 1998]). Cost-benefit calculations can only be useful if the government intends to force the estimated lower costs on some individuals in order to confer some estimated higher benefits to other individuals.
These ideas are not easy to grasp. (It took me several decades to realize their import.) They undermine a structural pillar of what has been the reigning political culture of the past century and a half—that the role of government is to help some individuals by imposing costs on others. An alternative approach in economic theory is not to “impose” anything except if it follows from a rule that each and every individual would consent to, as James Buchanan and Gordon Tullock explained in their seminal 1962 book, The Calculus of Consent; my anniversary review for Econlib tries to give an idea of the intellectual force of this argument. (Note that this approach does not necessarily justify a minimal state.)
Perhaps I can illustrate the problem with my own intuitive calculations regarding the Covid-19 vaccines. Given my preferences, my circumstances, and my probabilistic guesstimates, I determined that the benefit of a the vaccine was higher than its cost—for me. By the way, I also hypothesized that the principle of portfolio diversification must be a constant of the universe and decided to mix a Pfizer booster, which I could by then choose at Walmart, with a previous two-dose Moderna, the only choice I had first had under the government allocation system. I don’t pretend I can decide for any other adult, but I certainly can, and did, make similar recommendations to my friends and loved ones.
The quote marks I put around “compensation” at the beginning of my post may now be easier to understand. A compensation must be accepted in a voluntary trade or transaction (even if ex ante and in a probabilistic context), or it is not a full compensation.
The problem of weighing the benefits of some against the costs to others is related to attempts at comparing and adding up preferences across individuals. The opinion of the economic analyst or of the committee of bureaucrats writing the cost-benefit analysis is of no more scientific value than that of any Blue, Red, or Brown politician down the aisle. Consider the following illustrative question: Would the loss of one dollar by every American adult represent a higher or lower cost than the $250 million transferred to a single one chosen at random among them? And can the answer justify forcing the 250 million individuals pay $1 each in a government lottery ticket?
It is true that in most Western countries, there was no legal obligation, sanctioned by legal punishments, to be vaccinated against Covid-19. The coercion, though, was more subtle and worked through several prohibitions and daily hurdles for unvaccinated individuals. We are quite far from benevolent advice or motherly nudging from disinterested politicians and wise bureaucrats; but that’s how Leviathan works.