The economics of pandemic influenza risk

There is a new NBER paper on this topic, by Victoria Y. Fan, Dean T. Jamison, and Lawrence H. Summers, here is the abstract:

Estimates of the long-term annual cost of global warming lie in the range of 0.2-2% of global income. This high cost has generated widespread political concern and commitment as manifested in the Paris agreements of December, 2015. Analyses in this paper suggest that the expected annual cost of pandemic influenza falls in the same range as does that of climate change although toward the low end. In any given year a small likelihood exists that the world will again suffer a very severe flu pandemic akin to the one of 1918. Even a moderately severe pandemic, of which at least 6 have occurred since 1700, could lead to 2 million or more excess deaths. World Bank and other work has assessed the probable income loss from a severe pandemic at 4-5% of global GNI. The economics literature points to a very high intrinsic value of mortality risk, a value that GNI fails to capture. In this paper we use findings from that literature to generate an estimate of pandemic cost that is inclusive of both income loss and the cost of elevated mortality. We present results on an expected annual basis using reasonable (although highly uncertain) estimates of the annual probabilities of pandemics in two bands of severity. We find:

1. Expected pandemic deaths exceed 700,000 per year worldwide with an associated annual mortality cost of estimated at $490 billion. We use published figures to estimate expected income loss at $80 billion per year and hence the inclusive cost to be $570 billion per year or 0.7% of global income (range: 0.4-1.0%).

2. For moderately severe pandemics about 40% of inclusive cost results from income loss. For severe pandemics this fraction declines to 12%: the intrinsic cost of elevated mortality becomes completely dominant.

3. The estimates of mortality cost as a % of GNI range from around 1.6% in lower-middle income countries down to 0.3% in high-income countries, mostly as a result of much higher pandemic death rates in lower-income environments.

4. The distribution of pandemic severity has an exceptionally fat tail: about 95% of the expected cost results from pandemics that would be expected to kill over 7 million people worldwide.

In other words, in expected value terms an influenza pandemic is a big problem indeed.  But since, unlike global warming, it does not fit conveniently into the usual social status battles which define our politics, it receives far less attention.


'But since, unlike global warming, it does not fit conveniently into the usual social status battles which define our politics, it receives far less attention.'

Or it receives exactly the amount of attention one would expect, as indicated in this research - 'People who live in poorer American neighborhoods face a number of health disparities, and a new study led by the Yale School of Public Health indicates that increased rates of hospitalization from influenza is yet another issue facing the less affluent.

In a report published in the Centers for Disease Control and Prevention’s (CDC) Morbidity and Mortality Weekly Report, researchers led by James Hadler, M.D., M.P.H., clinical professor of epidemiology at the Yale School of Public Health, reveals that residents of neighborhoods with high numbers of people living below the poverty line are twice as likely to be hospitalized for influenza than their peers residing in wealthier areas. This holds true across all age, racial and ethnic groups, Hadler said.

Because data on socioeconomic measures are generally not included in public health surveillance data, Hadler’s team had to find a novel way to determine the role of poverty on influenza infection.

“We have data by age, by sex, by race and by ethnicity, but we didn’t have data on socioeconomic status for any of the problems that we were working on,” Hadler said. Surveillance data does, however, include residential addresses, which form part of the standard set of information collected with lab results, the main initial surveillance source for information that leads to determining influenza hospitalization rates. The team used that information to geocode their data, and merged it with information from U.S. Census tracts that provided information on poverty rates in those areas.

Hadler and his team conducted the study through the Connecticut site of the CDC’s Emerging Infections Program (EIP), based in part at the School of Public Health. The EIP is a CDC-led consortium of sites across 10 states, through which data is collected on a number of infectious diseases. Connecticut’s program is a collaboration between the Connecticut Department of Public Health and Yale, funded by a cooperative agreement from the CDC. Yale has been an EIP collaborative site since 1995, when the program began.'

Beach front property being washed away would be an economic disaster - poor people suffering more from disease is just one of those things easily ignored. Yep, it fits perfectly into those 'social status battles which define our politics.'

I'm not sure of all of the causes, and probably some of it is linked to poverty, shared ventilation, lower hygiene/cleaning standards in buildings, poorer average nutrition, and a variety of other things.

But, also, if you're unemployed and have access to public health care (which I think is a good thing to have this access), you're more likely to not mind spending a few hours waiting at a hospital than if you have a million pressing projects at work. While there are clearly cases where flu sufferers should seek medical attention (best to leave it to the docs to expound on this), for the most part this just exposes the public to risk of spreading the flu and is completely unnecessary for treatment (like, just drink lots of water, get some rest, try to keep down some decent nutrition, and wait it out a few days, let it run its course).

@prior_test2 - that's always true, and insurers account for this fact: poor people are worth less than you or (especially, since I'm in the 1%) me.

Notice also how Summers sticks his nose in and gets credit as a co-author. He's like that, such a bandwagon guy.

Insurers don't care about people in the 1% in the Phillipines. What is that, about $2000/yr income?

That means it's cheap to collect monthly dues. Servicing the poor has famously high margins due to their lack of options, so much so that banks who count on their good reputation often steer clear rather than face the "pro-poor" lynchmobs. To think that people are "hoarding" gold or planting tree crops as insurance, when they would have better access to financial services if we wouldn't treat any financial institution as evil for serving the poor (who, like it or not, are generally riskier customers).

I'm not a huge fan of the sort of thinking I'm about to get into, but: 1) many pandemic deaths are likely to be old people with weak immune systems who are beyond productive time, 2) many pandemic deaths are likely to be children with undeveloped immune systems who we have not yet invested much in (not much spilt milk to cry over), 3) even in a 1918-like pandemic where the strongest immune response was the situation related to high mortality, those who are most economically productive in the present period are most likely to have economic resources to access the most effective vaccines/treatments.

For these reasons, there is likely to be an upward bias in most estimates of economic costs (the statistical value of a life is completely the wrong number to use, for example).

I think the highest costs are likely to be interruptions of markets because people don't go to work, don't go to markets, etc. As a result, any remotely large business should have a pandemic preparedness plan which largely revolves around ensuring work-flow continuation at a period when many people will not want to come into the office. Most probably have one gathering dust on a shelf somewhere as a result of the most recent pandemic scare, but would struggle to implement because no one is up to date on implementation procedures.

The lowest hanging fruit is good hygiene like washing hands and, when sneezing or coughing, trying to minimize the possibility of sending the virus into the air by coughing/sneezing into a handkerchief or a sleeve if you don't have time.

Also, in the matter of international responses, there is much opportunity for trust building between nations in devising coordinated responses (in particular with respect to public messaging campaigns, ensuring that there's an existing capacity to implement the pandemic strategy that should be sitting on the shelf, and, more problematically, clear communication about realistic expectations about the extent to which access to vaccines/treatments will flow across borders - Canada, for example, has precisely zero intentions of relying on market access to US vaccine production in such a case and prioritizes upholding its own vaccine production capacity).

Forget washing your hands [eg, how do you do that on a commuter train?]. Don't touch your face, particularly eyes & nose with your fingers.

As far as sneezing/coughing is concerned, wear a mask.

Right, masks are big in Asia. I'm not sure how good they are, as you have to change them frequently.

BTW, a good pandemic, as TC once pointed out, will help jump-start the economy (as did the Black Death in the 14th C).

Hand antibacterial lotion is cheap and it works. I don't usually use it, except for when travelling in low-hygiene places, especially before eating. It works on commuter trains or basically anywhere, and a 50mL bottle lasts for a very long time.

As a part of training for a job I used to have, after sanitizing with anti-bacterial soap, we had to apply this liquid that glows under a certain kind of light in all areas where there is still an active bacterial population. I assume (or hope) that most medical professionals have undergone a similar training in hand washing - for practical purposes, the way that most people wash their hands is basically useless for preventing the spread of viruses or bacteria.

Yes, not touching eyes and nose is important.

The unusual thing about the 1918 pandemic is that it DIDN'T kill mainly old and young - the death figures are W shaped. The three peaks were the usual infants and very old people, but it had an uncharacteristic peak for people in their 20s and 30s.

It triggered an over-enthusiastic immune response which evaded normal feedback controls, with the outcome that the immune response attacked the body itself in those with the strongest immune systems: Strangely, a treatment which reduced the immune response would be effective in such a case.

My guess is that previous flu pandemics were exacerbated by greater poverty and other illnesses. If you are underfed and maybe eating bad food and working in a physically tiring job flu is a great deal more of a risk when compared to today's first world environment. In addition we have ability to create immunization so quite quickly. So I would guess we don't really need another massive centralized government boondoggle to deal with this threat.

Beware explaining everything with one framework, even if that framework, like "status competitions", is often right.

There are prima facie important moral differences between the flu and global warming: no one voluntarily chooses to have the flu, no one is made better by it. Climate change, so the story goes, is driven by greedy people who voluntarily choose to pollute, and do it for personal profit.

Perhaps these differences can be argued to not be *truly* important, or these accounts not really accurate, but the median person is not known for their depth of moral inquiry. I'd bet a fair number see the issue in the terms I sketched above.

For sure. A modern muscle car is fun, whether it is a Dodge or a BMW, and drivers would rather not be reminded that it has anything to do with those funky old words: carbon footprint.

The differences are not so stark. In both cases, there is little that individuals can do, yet states can individually and collectively reduce risks in ways that are probably Pareto improving. Yes, people contribute to climate change via greenhouse gas emissions, but they also contribute to pandemic risks through traveling, lack of hygiene, etc.

One is cumulative, one is not.

The Koch brothers clearly agree that it would be Pareto improving. But perhaps not toooo far off.

If it doesn't fit into the usual social status battles which define our politics, it gets no attention. If it does, it sees no progress. So flu is underoverlooked, while climate change is overunderlooked.

"But since, unlike global warming, it does not fit conveniently into the usual social status battles which define our politics, it receives far less attention."

I think the two main things that are different about influenza are 1) nobody (approximately) is actively opposed to improved public health to reduce influenza risks and 2) the ordinary political & regulatory process is already at work to reduce influenza risks.

Neither of these is true of global warming. So people who are in favor of actions to reduce global warming risks have become a big attention-getting movement in order to 1) counter the people who are loudly & actively opposing such actions and 2) cause the ordinary political & regulatory process to engage with reducing global warming risks.

This #1.

Very few people opposes the actions taken to minimize influenza spread. Health organizations communicate alarm messages in spite the tourism industry crying for billion USD loses. Influenza alert has contributed to the bankruptcy of some major air carriers and no one blames health organizations for being anti-business.

It's not that influenza it's a minor risk, it's just that the battle to make people realize the magnitude of the risk has been won before.

It's an interesting example of how differently we approach comparable risks when:

a. There is an existing organized interest group who will visibly lose if we address it.

b. Questions about the risk become (for whatever reason) bound up in political and social identity.

Re: nobody (approximately) is actively opposed to improved public health to reduce influenza risks

If the measures include such common sense things as paid sick leave from work, you will find opposition cominbg from all the usual suspects, and more than enough to gridlock the proposed measures.

Also, improving public health vis a vis the flu is basically a matter of better access to vaccines and treatment. Improving it for, say, asthma is about regulating polluters. The latter group are more motivated to fight back.

Related: The risk of death by asteroid impact:

Chapman and Morrisson (Nature, 1994) calculate a chance of dying of asteroid or comet impact (in the USA, for some reason) of 1 in 250,000 (Table 3). By comparison, the pandemic risk is 0.98 SMUs (Table 3 in Fan et al) which I understand to be 0.0098 percent or one in 10,000 globally, but only 0.002 percent or 1 in 50,000 globally. That is, if you live in a rich country, around five times as likely to die from pandemic than from asteroid impact.

"Estimates of the long-term annual cost of global warming lie in the range of 0.2-2% of global income"

Calculated using an absurd methodology. But lets not worry about that...

I'm sure no one will be offended if you have a better methodology to offer.

Did you figure out what p-values are yet, Nathan?

Did you figure out what "analogues" means yet?

Like, intro to stats has at least 3 or 4. You can hack any of them.

So this is what Larry Summers does in retirement.


Summers et. al. make "long term" costs out to the tenths of a decimal and wont say what year they are projecting out to.

This is why scientists don't want economists even in the lobby when they give a talk.

Assume for a moment that a median citizen is conversant on both risks. A key difference might be that one is old, background, experienced. The other is new, novel, and we are told, accelerating.

Don't go into the weeds on detail, just accept that a growing risk will be felt differently than a growing one.

Arg. Growing vs static risk.

By some estimates, 50 million people died in the 1918 flu epidemic. And 40 million have died from AIDS. I am old enough to remember polio and tuberculosis epidemics (and quarantines). I am old enough to remember nationwide mandatory vaccination drives, with vaccinations by injection given to all of us children at school by a nurse who would disinfect the needle by holding it over a flame, vaccinations given orally on a sugar cube in schools and at churches, with long lines of anxious children (especially that syringe and the flame) and obedient parents. Anti-vaxxers have the luxury of no memory of such "ancient" diseases as the flu, polio, and tuberculosis and the quarantines.

Nobody says epidemic anymore dude. If its not a pandemic, its not worth even talking about.

There has been an influenza pause for a hundred years, despite steadily increasing numbers of viruses. This is a huge hoax perpetrated to keep medical researchers rolling in grant money.

In 1345 the bubonic plague had not not afflicted anyone in Europe or the Middle East for centuries. Not a good time to conclude that therefore it never would again.

There have been a number of recent, potentially-scary outbreaks over the past let's say two decades, and in each case, they've been successfully contained by modern medicine/health/government responses.

Maybe the reason developed nations aren't panicking about a flu outbreak is because they think (rightly or wrongly) they can weather one, more or less.

There is no such similar reason to think, however, that we could effectively cope with, say, the rapid drowning of the Earth's major cities/infrastructure, or the sudden loss of drinking water from deglaciation, or massive disruptions to food production, or any of the other boogeymen lurking in the AGW closet.

Right "spot treatment" works more on one that the other.

I suppose the expected-value cost of a virus engineered to be a biological weapon belongs in the "unknown unknowns" category, yet as technology becomes more accessible to all the risk may become increasingly significant.

One has potential for big payoffs to developing countries and massive expansion of control for developed countries, the other does not. Seems like an easy choice to me.

The economics literature points to a very high intrinsic value of mortality risk, a value that GNI fails to capture.

You need the economics literature to tell you that large numbers of people dying is a bad thing, irrespective of its impact on GNI?

We should develop an inexpensive mask that remains functional after decades of storage. Then we should stockpile ten billion Of them.

Due to the nature of spreading pandemics, there's actually a decent amount of time to react after the onset appears to be coming. All you need is a few teams of machinists and millrights on contract to have to divert from whatever other projects for a week or so in order to to rapidly ramp up production to put out those 10 billion masks in the space of a couple/few weeks. Probably cheaper than storing them, especially when considering the time value of money.

It's a bit more complicated to ramp up with vaccines with present technologies because a lot of time is wasted for biological processes to produce the necessary inputs to ramp up production, which means that you need a lot of excess capacity actually on hand in order to be able to ramp up to any useful level of production in a pandemic scenario.

Let's not forget that global warming is itself likely to increase the risk of a global pandemic:

Basically, many diseases and mosquitoes thrive best in warm climates. Malaria's range, for example, is limited to the locations where temperatures are high enough that it can get through one stage of its life cycle in a mosquito host during the time when the mosquitoes are feeding on blood. The latter is a fixed period (~20 days, from memory) regardless of temperature. The former is a function of temperature. This is why we see malaria in the Amazon but never in say, Oregon.

But the models do not offer precise daily forecasts in a highly volatile data series, so climate science is 100% wrong about everything, probably CO2 is an anti-GHG, and we don't have to worry about any of that. /sarc

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