The Economical Control of Infectious Diseases

for comments. The findings, intepretations, and conclusions expressed in this paper are entirely those of the author(s) and not necessarily represent the views of the World Bank, its Executive Directors, or the countries they represent.Working papers describe research in progress by the author(s) and are published to elicit comments and to further debate Summary Although much interesting work has been done by economists such as Francis, Kremer and Philipson on infectious diseases, this literature does not set out the general structure of the externalities involved in such situations. This paper provides a general framework for discussing these externalities and the role for government interventions to offset them. It moves the discussion away from its focus on HIV, a fatal infection for which there are few interventions, and its focus on vaccinations, that are plausibly discrete decisions, to more general ideas of prevention and cure that are applicable to many more diseases in which interventions exhibit a continuum of intensities subject to diminishing marginal returns. Infections and actions to prevent or cure infections have costs. Individuals balance the parts of these different costs that they control. Government policy should balance these costs for society taking into account individuals' behavior. To do so requires a strategy combining preventive and curative interventions to offset two externalities, the pure infection externality and the pure prevention externality. The relative importance of the components of the strategy depend crucially on: (1) the biology of the disease including whether infection is transmitted from person to person or by vectors; (2) whether infection leads to recovery and future susceptibility, immunity, or death; (3) the relative costs of the interventions; (4) whether interventions are targeted at the population as a whole, the uninfected, the infected, or contacts between the uninfected and the infected; and (5) the behavior of individuals leading to the two types of externalities. Based on only the infection externality, government subsidies to affect private behavior should equally favor preventive and curative activities if people recover to become again susceptible. In other situations, other subsidy/tax strategies are optimal.