Economics (in the broadest sense) of lockdown and vaccine

I saw this interesting tweet the other day

"Idiots: A vaccine is coming soon, let’s party woooo!

Realists: “Soon” means half a year, and right now the virus is growing super fast. No partying!

Econ nerds: A vaccine on the way means the expected value of staying disease-free just increased."

This is one of those things that make economics so interesting to me (I’m not an economist, just someone who reads about it a lot). At first, I couldn’t see why a vaccine would make a lockdown, wearing a mask, etc. more valuable, but then I got the idea: without a vaccine, anything you do to reduce your likelihood of getting Covid “pays off” by giving you some months of health, but there is a significant chance you’ll get sick eventually. With the prospect of a vaccine, everything you do to reduce your likelihood of getting sick makes it possible that you’ll stay healthy until the vaccine is available - and thus never get Covid.

By analogy, you probably look both ways when you cross the street - but if you knew that in a month a potion that would give you immortality would be available, you’d be a lot more careful than you are today when crossing the road.

I’ve always understood the lockdowns, masks and social distancing as being about buying time until a vaccine was developed. And it’s literally “buying” time, at least for the wealthy nations. As I said on my Facebook many months ago, Canada is one of the richest nations in history on a per capita basis. What was the point of becoming so rich if we can’t even afford to let at least some of our population take a year off to limit the spread of a deadly disease?

Of course, this is even more true for the US.

Some people tried to argue about “How long will we do this?” and my answer was, “Well, the relevant scientists are telling us it’ll likely be 12 to 18 months before a vaccine is widely available, so let’s try it for that long. If at the 12 month mark there’s no evidence that a vaccine is possible, we can start arguing about how many people should die for the economy.”

And hey, look, here we are, with more than one possible vaccine coming to market in the next 3 to 6 months. If more people had understood this argument earlier, we could have saved a lot more people.

Slightly more mathematically, there is a benefit to staying disease-free, which we can evaluate per month. There is a cost of getting the diseases, which to some extent increases the longer you wait - since you are older and more at risk, and have a greater chance of getting an ailment which increases your risk.
Add up the months of benefits, subtract the cost of the disease, figure out the probabilities of being disease free each month, and you more or less have the expected value. This pretty much assumes everyone will get it eventually.
With a vaccine your delay in catching the disease increases the chances that you will make it to vaccine availability, which would eliminate the cost. (Assuming 100% effectiveness - you can compute the actual reduction.) That clearly has more value than getting the disease at some point. So, actions which reduce the chance of making it to vaccination availability reduce expected value.
My qualifications - some statistics, and my daughter has a degree in economics from Chicago - and we’ve taught a class together.

It’s also about spreading out the infections to avoid overwhelming the health care system. There’s been less promotion of “flattening the curve”, are more ridicule of the concept, after the first peak broke and the second peak was comparably low. But now the third peak (on the “all of the US” curve) is caused by overwhelming spread in less populous states, and they are now are running out of ICU-beds, so flattening the curve should be the word again.


Half right. The other half is to slow down the disease so that the hospitals don’t get overloaded as is happening now. Even if there were never a vaccine, that would still be valuable. In addition, they are learning more about how to treat it.

Agree. I have sacrificed immensely to stay virus-free and I will be mightily pissed off if I catch Covid right before it’s my turn to get the vaccine injection.

I think that’s a good analogy.

Basically it’s game theory.

Since there is no “cure”, presume that if or when you catch COVID, it will run it’s course to whatever outcome. The risk is that to survive, you may require hospitalization and treatment and the capacity to treat you might not be there. So really the “reward” for delay is that you are buying time for the hospitals to develop capacity to accommodate you and figure out new ways to treat you.

With a vaccine, now the “reward” is that you might never get it at all.