Deck 2: Economics of Optimal Disease Control

Question 1

What are the methods economists use to incorporate the economic perspective in the SIR model? From a policy perspective, why are these methods important?

Answer 1

To study a pandemic, epidemiologists use the scientific method to forecast the spread of disease. Economists use the following methods to incorporate the economic perspective in the SIR model:
• Adding economic costs to the framework.
• Modifying the implications related to scale effects in the process of infections. The modified framework is less prone to the risk of overestimating the effect of policy interventions that affect both susceptible and infected persons.
• Introducing another population group, the "lucky", who start healthy and, for exogenous reasons, are never affected by the epidemic.
• Reducing the number of state variables to one simplify the model and make it closed-form solutions of embedded economic programs more likely.
• Tying the likelihood of infection to participation in labor and consumption markets. These modes of transmission, then, depend not just on how many people are susceptible and infected, but also on how much susceptible and infected people choose to consume or work.
From a policy perspective, these methods are important because they help predict many factors that can affect negatively the economy. For example, the model can help predict who is more subject to get sick, who is more subject to be unemployed, how many hospital beds and ventilators are needed, and the how the pandemic affect the consumption level.

Question 2

In the study of the coronavirus pandemic, why did economists adopt the SIR model from epidemiology?

Answer 2

Economists use a common model from the field of epidemiology, the Susceptible, Infected, and Recovered (SIR) model-which demonstrates how susceptible individuals may become infected and eventually recover-to consider economic applications. They identify the benefit of optimal targeted policies that lock down alternative groups. This optimal control problem estimates the tradeoff between lives lost and economic losses, finding significant benefits for targeted lockdowns. With this approach, economists provide a method to study the economic implications of the global spread of disease, important in a world that may experience additional pandemics.

Question 3

This chapter argues that, in the history of economic thought, relativists and absolutists claim that economic ideas progress in different ways. Contrast the position of the relativists and the absolutists. In what circumstances, if any, is each position correct?

Answer 3

Two schools of interpretation, relativism and absolutism, highlight important distinctions for the progression of ideas.
Relativism is the current economic environment shapes the questions and theories of researchers. Procedures of justification and standards of reasoning stem from assessments of the context calling attention to them. The progression of ideas has properties relative to a given framework of analysis. Once the framework of analysis is identified, the outcomes of the research process are specified.
Absolutism is the internal factors of the discipline, such as ongoing and unresolved questions and the discovery of new solutions, shape the progression of ideas. Absolute standards guide the judgment of theories. Analytical contributions are not traced to influences from the socio-economic environment. A set of internal pressures and values influences researchers. Scientific advance remains on the intellectual plane of being, the level of ideas.
Synthesis of relativism and absolutism:
Which of the two schools of thought is correct, relativism or absolutism? To contextualize research on the economics of optimal disease control, both perspectives offer contributions. But a synthesis of the two views provides a method to evaluate contemporary economic research. Joseph Schumpeter (1961), the influential Austrian political economist, argues that, with respect to the progression of ideas, two groups exist: innovators and articulators. Innovators craft novel ideas that lead to revolutions in a discipline (e.g., John Maynard Keynes). Articulators adopt the methods of innovators and expand the ideas, thus developing the discipline.

Question 4

Does the concept of paradigm provide a method to synthesize the position of absolutism and relativism? In your answer, define paradigm and paradigm shift, referring to the famous book by Thomas Kuhn (1962), The Structure of Scientific Revolutions.

Question 5

Are the economists who adopt the SIR model from epidemiology innovators or articulators? Explain.

Question 6

Explain the standard SIR model. Why is its "simplicity" useful to address a disease pandemic? What are the model assumptions? What are the model limitations?

Question 7

With the SIR model, do economists use an existing paradigm? With economic applications of the SIR model, do they undertake normal or extraordinary research? Explain.

Question 8

Discuss the optimal targeted lockdown extension of the SIR model. What are the contributions of this economic analysis?

Question 9

Discuss the equilibrium social distancing extension of the SIR model. What are the contributions of this economic analysis?

Question 10

Discuss the value of human life extension of the SIR model. What are the contributions of this economic analysis?