Living Economics

Aid for AIDS
Philipson, T.
Benefit/cost analysis applied to the epidemiology of AIDS leads to surprising behavioral implications and policy recommendations.

Common cold is a disease that is highly prevalent but hardly detrimental to human life. AIDS (acquired immune deficiency syndrome), on the other hand, is not very widespread but is fatal. Neither disease has any permanent cure as of date, but both diseases can be averted to a large extent by taking some elementary preventive measures. But the extent to which people take preventive measures differs for these two diseases, and, so does government expenditure on educational campaigns and research. Why?

Economic epidemiologists suggest the use of the familiar cost-benefit analysis to explain this. People choose between protection and exposure based on the incentives involved – complications that are likely from infection (cost of infection) relative to the disutility of protection (cost of protection). For example, protection from many airborne diseases, such as common cold, requires complete isolation, whereas infection involves only a few days in bed. The cost of infection here is minor when compared to the protection cost; whereas, safe sex or a disposable needle is a small price to pay for averting a fatal disease like AIDS.

Biological models of epidemiology don't take into account these behavioral aspects and are, hence, myopic in their vision when explaining the spread of diseases. For example, when studying the spread of AIDS, these models assume that transmissive behavior does not respond to surrounding incentives. The spread of diseases is thus primarily determined by the interaction between individuals. According to the biological model, as the interaction between infected and non-infected people goes up, the risk of spreading the disease also increases. But this is not necessarily true for AIDS! Human behavior suggests that as the risk goes up, uninfected people would be more likely to choose other uninfected people as their sexual partner. Further, the demand for protection is also likely to increase with the increased risk. Thus, as opposed to biological models, the hazard rate of infection need not necessarily go up in economic models – on the contrary, it may decrease when a disease such as AIDS becomes widespread.

The use of this rationale could have some important implications for public health expenditure, especially public camps for screening AIDS. For one, the private incentive to take preventive measures may decrease for an individual who is tested HIV-positive. Also, people who are tested negative could use the result to obtain unprotected sex, which they may not do otherwise. Thus, widespread testing may actually hasten the spread of the epidemic! Another issue is the huge amount of public money that is spent on developing drugs for extending the life of infected patients. Whereas it may be worth the money to extend the life a top-notch AIDS researcher, saving a large section of the infected population may only increase the risk of spreading the disease to others!

  • Philipson, T. “Public Health and Economic Epidemiology,” in Tommasi M. & Ierulli, K. ed. 1995. The New Economics of Human Behavior. Cambridge University Press.
  • Coughlin, E. “Challenging the conventional wisdom,” The Chronicle of Higher Education 1/26/1994.
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