Thread: Is the main benefit of a COVID vaccine health or economic activity?

Or: the counter-factual matters. What would we do in the absence of or delay in a vaccine?

Or: Let's replay the lives v. livelihood debate. But think about policy endogeneity. 1/20

@nebuer42 @arpitrage

TLDR: The value of a vaccine, & thus your distribution priorities, depends on the counterfactual. If CF is no/delayed vaccine & *suppression* (eg lockdown), main benefit of vaccine is economic activity. If CF is no/delayed vaccine & *no suppression*, main benefit is health. 2/20

In the former CF, you prioritize the most productive people. In the latter CF, you would prioritize people at greatest risk of health harm from COVID. 3/20

@oziadias @sarahcobey @maciekboni @pritika13 @sidrup @tylercowen @ATabarrok @neelkanthmishra

Background: I'm thinking about how to value a vaccine w/ efficacy Z & price p? What's the value to difft groups, defined by observables like location, demographics? We use that to advise LMICs on distribution priority & ultimately, how many doses to purchase. 4/20

@profmohanan

The value of a vaccine depends on the counterfactual (CF). To most simply illustrate the core issue, assume the CF involves no vaccine. But that's not enuf to describe outcomes in the counterfactual. We need to know what would happen with suppression policy w/o a vaccine. 5/20

Please indulge me -- for pedagogical reasons -- in some bad generalizations, which I'll revisit later. Assume, incorrectly, that there is no social distancing. Also, assume economic outcomes include on wages or profits, not health. Then we might think... 6/20

In the CF of vaccine & no suppression, health outcomes = bad, but economic outcomes = good.

In CF of no vaccine & suppression, then health = good, but economy = bad.

Now consider outcomes w/ vaccine: health = good & economy = good. (I assumed vaccine ends suppression.) 7/20

This implies that if the CF includes no suppression, the main benefit of vaccines is improvement in health.

If CF includes suppression, the main benefit is economic.

This has big implications for vaccine distribution priorities. 8/20

@jonathangruber1

If the counterfactual includes no suppression, we should prioritize people facing the greatest health risk from COVID. (I'll call this the conventional approach to distribution.) 9/20

If the CF includes suppression, we should prioritize those who are the most productive.

So your distribution plan depends on yr belief about continued suppression w/o vaccine. This result was surprising to me cuz I assumed suppression in the CF but started valuing vaccines on health benefit.

Or: the key to valuing a vaccine is predicting how long suppression lasts.

Some caveats.
1/ If there is a lot of voluntary distancing, the no vaccine + no suppression CF is incorrect. Even if the govt doesn't suppress activity, ppl do so on their own. But then vaccine priorities should focus on productivity. 11/20

@Austan_Goolsbee @ChadJonesEcon

2/ Delay complicates things. With short delay, ppl may be willing to suppress a bit longer. With long delay, suppression fatigue erodes distancing. So short delay suggests prioritizing productive ppl, long delay prioritizing ppl w health risk. 12/20

The key is predicting what ppl think the delay til the vaccine will be. (Are there any surveys on this?) 13/20

@NeelanjanSircar @_CMIE

3/ I assumed a vaccine eases suppression. That's true if we vaccine everyone we need to. But if there is a shortage of doses, & we can only vaccine 1/2 the needed ppl in a location, then suppression may have to continue. 14/20

(This suggests value in vaccinating 1 area then another rather than spreading doses out, but I am guessing prioritizing certain areas over others may be politically difficult.) 15/20

If partial vaccination includes continued suppression, then the benefit of partial vaccination is different than full vaccination. If the CF is no vaccine + suppression, then benefit becomes smaller: either way, economy is bad & health is medium. 16/20

Implication: Countries should be willing to pay less for initial doses unless they can store them up and vaccinate everyone at once -- though I doubt that is politically feasible. 17/20

If CF (to partial vaccination) is no/delayed vaccine + no suppression, then the benefit of vaccination is the same lives v. livelihoods tradeoff: partial vaccination increases health a bit but reduces economic activity. 18/20

But there is a hitch: even if you think the health benefits of suppression outweigh the economic costs, you may not think that a partial vaccination that offers only medium health is enough to outweigh the economic costs of continued suppression. 19/20

@DanielJHemel

I know there is a lot I'm ignoring. This is thinking-in-progress tweet. Eg, time discounting is critical. That may outweigh everything -- though much more so in the partial vaccination analysis than the full vaccination analysis. END OF THREAD 20/20