AIDS : The economic rationale for public intervention

Many health professionals assume that the government should be involved in combatting the AIDS epidemic. While the case for government intervention may be clear to those in the health professions, many economists believe that too many resources have been invested in the fight against AIDS. It is useful to compare the case of AIDS with that of malaria. As The Economist recently noted, malaria causes three times the worldwide burden of death and disability as AIDS. Yet governments spent about US$1 billion on AIDS research in 1990 and only US$60 million on malaria research. While it may well be the case that the world should put more effort into fighting both malaria and AIDS, from the standpoint of health officials in developing countries with limited budgets, it is not clear whether more resources should be allocated to fighting AIDS. From an economic standpoint, an argument for government intervention to fight the AIDS epidemic must have several components: ■ First, an equity argument or a source of market failure must be identified. As Philipson and Posner (1993) argue, standard economic welfare analysis does not typically suggest that the government should interfere in people's decisions about what risks they wish to assume. ■ Second, it must be shown that cost-effective interventions exist. Given that there is limited evidence about the effectiveness of anti-AIDS programmes, it is not clear that these programmes should be the highest priority investments for poor countries with many other problems. ■ Third, even if there were a theoretical case for government intervention, and even if cost-effective interventions could be found, it must be argued that the political process could lead to these programmes actually being implemented. This paper deals primarily with the first of these issues, arguing that even in those cases in which the risk of contracting AIDS is assumed voluntarily, there is a theoretical case for government intervention in the AIDS epidemic. Economists generally recognise the case for public subsidies for vaccination, AIDS: The economic rationale for public intervention