Covid economics - first birthday

One of the major entry points for economists in epidemiology has been to work on improving the tools for modeling the dynamics of the Covid-19 contagion as it affected the population across space and time. Since at least the 1970s—known as the “microeconomic foundations of macroeconomics” period—economics has called for individual decisions to be taken into account, so as to better predict large macroeconomic movements. In this case, the incidence of Covid in the community was the “macro-population” variable, and endogenizing the contact matrix (in SIR models, for example) was the means to improve prediction. This involves studying the behaviors of rational social actors, who “reoptimize” their risk exposure choices and partially curb the curve of contagion themselves through decisions on movement (going out vs. staying in), social participation (distancing, social “bubbles”), and self-protection (wearing a mask, preventive measures). This attempt to endogenize selfprotective attitudes toward risk may even shed light on why epidemiological models were inaccurate, overestimating contagion, especially in France during winter. In other words, microeconomic agents could readily make forecasting models lie, and they took advantage of this. The shades of the “Lucas critique” is not far off.

Another area of research in Covid economics focuses on relatively recent developments in behavioral economics. Encompassing the fields of psychology and economics, and having reached a good level of recognition after being awarded two Nobel prizes in economics in 2002 and 2017, it is only natural that behavioral economics has found itself at the forefront of research during the crisis. It took advantage of this position to “test” its major and often still fresh results, using the Covid epidemic as its laboratory. Cognitive biases, information processing, and the salience of certain events—or rather, of certain forms of communication about these events—have been the subject of considerable attention during the crisis. Furthermore, there has been a lot of interest in the role of nudges, (sometimes) tested as an alternative to classic economic incentives to guide agents’ prophylactic behaviors. Governments that implemented “nudge units” have seen the beginnings of a return on their investment.

I believe that behavioral economics is just beginning its alliance with public health, for which it has only been producing results for the past decade (Loewenstein at al., 2013). One indisputably promising field examines how agents adhere to preventive measures and, particularly, to vaccines. Two main avenues of such determinants are explored. One examines how social norm nudges improve compliance with preventive measures and vaccines (Bilancini et al., 2021), while the other examines the cognitive biases in risk perception and probability processing, which are the source of the nudge strategies, particularly to determine to what extent agents accept vaccines.

This analysis, arbitrarily divided here into four parts, is still pretty recent. With greater hindsight, some of the points currently identified as major may change. Nevertheless, a provisional conclusion can be drawn. For a problem that appeared only a little over a year ago, the amount of Covid-related output generated by economists is already impressive. However, it should be recognized that economics is not doing it alone — almost every discipline has waded in (obviously, this is in addition to the fields of medicine and public health, which immediately and visibly mobilized against Covid). A good example is the article by Bavel et al. (2020), which goes beyond economics to encompass the concerns of the social sciences.

Interdisciplinarity has undoubtedly been facilitated by the empirical turn taken by economics, which has adopted the use of randomized trials and experimental economics as well as econometric and data science techniques. The quarrels and great debates of the 1970s and 1980s (such as classical vs. Keynesian economics), although probably a prerequisite to developing a solid body of knowledge, were unlikely to be directly useful to public health decision-makers. The economic output of recent years, derived from extensive empirical evaluation, has brought economists closer to the experimental sciences and to the production of applied and applicable research results that can be useful in medicine and elsewhere.

A less positive observation might be that decisionmakers and the general public have primarily observed and retained items 2 and 4 of this overview, in which economists are seen as “bearers of contradiction” to physicians and epidemiologists, because economists point out the economic and social costs of decisions.
Contrastingly, the position taken here is to stress the role that economic analysis can play when aligned with public health approaches (as in items 1 and 3), enhancing the effectiveness of these approaches without necessarily opposing them or introducing another opposing motive, such as maintaining GDP. Economics has something to say, even when its (sole?) objective is that of saving lives. There is a glaring absence of economists on the Covid scientific advisory committee, the excuse being a desire to avoid suggesting that economics reasoning might have influenced its recommendations. However, even when their sole objective is to save lives, economists are worth listening to. And that is something not fully recognized by the medical profession, nor perhaps by society either.