<p>As you imply, a vaccine (if safe and effective) is a merit good because receipt of the vaccine by an individual has benefits to society as well as benefits to the individual.  In other words there is a positive consumption externality.  Therefore, if some individuals are declining to accept the vaccine when offered it, some sort of policy response to increase uptake may be appropriate.  However, the appropriate policy response must have regard both to the reasons why individuals are declining the vaccine and to possible unintended adverse consequences of the policy.  A subsidy attempting to internalize the externality is not the only possible approach.</p>
<p>The paper by <a href="https://siepr.stanford.edu/sites/default/files/publications/20-046.pdf" rel="nofollow noreferrer">Goodkin-Gold et al</a> referred to by 1muflon1 makes only towards the end the very important point that individuals differ: what it terms &quot;consumer heterogeneity&quot; (p 42).  One aspect of this is differences, eg because of age, in the benefit individuals receive from the vaccine: &quot;heterogeneity in benefits&quot; (pp 43-44).  I could not find any consideration in the paper of misinformation as such, but there is brief mention of &quot;anti-vax sentiment&quot; which is given as one example of personal cost associated with receiving a vaccine even if provided free, other such costs being travel difficulties and low tolerance for pain (p 45).  The paper then points out that a uniform subsidy to everyone, to encourage individuals with high personal costs to accept the vaccine might a) be effective in increasing uptake of the vaccine, but b) involve unacceptably high financial cost (what it terms &quot;unmodeled frictions&quot; (p 45)).  It goes on to suggest that, in view of (b), subsidies targeted at particular groups might be a better policy.</p>
<p>A possible criticism of the paper is its subsuming &quot;anti-vax sentiment&quot; within the general category of personal cost.  One might argue that monetary payment may not be effective in inducing individuals to accept the vaccine if they have a strongly-held view, however misinformed, that the vaccine is unsafe.  An information campaign to counter misinformation might be a more effective use of public funds.</p>
<p>If a policy of targeted subsidies were adopted, its effectiveness would be likely to depend very much on circumstances. The paper rightly points out that targeting can yield a net benefit to society even if many of the individuals in the target group would have accepted the vaccine anyway (p 45).  But it is also the case that targeting criteria, especially if the target is the misinformed, could be difficult to define and might raise issues of fairness.  In a worst case, targeted subsidies could induce individuals who would otherwise have been vaccinated to delay their vaccination in the hope of receiving a payment.</p>

CC BY-SA 4.0
2021-03-08T13:34:56.913Z
+1, these are all important points not mentioned in my answer. Although, I disagree on the point that incentives would not be effective for people with misinformation about vaccines. For example, there are people who consider climate change a hoax but generally they will respond to incentives (e.g. carbon taxes, taxes for non-separated garbage). Naturally, those people will have higher 'personal cost' so higher subsidy might be required relative to people who are not misinformed but I think it would be likely that monetary incentives controlling for costs would work equally well there
1muflon1
CC BY-SA 4.0
2021-03-08T13:48:09.287Z
@1muflon1  I can agree that a financial incentive will be effective with _some_ people who would not otherwise accept a vaccines due to misinformation.  My point is that some people will have such a strongly held view, and perhaps also have a high enough income, that even the offer of quite a large payment wouldn't influence them,
Adam Bailey
CC BY-SA 4.0
2021-03-11T13:43:55.637Z
@AdamBailey thank you very much for your help!
SU123
CC BY-SA 4.0
2021-03-08T13:14:27.863Z
2021-03-08T13:14:27.863Z
Adam Bailey
<p>Even if the vaccine is free it is possible to additionally internalize the externality with subsidy. That is government can just pay people to take the vaccine.  Note, that even with a flu vaccine just providing voucher for a free vaccine might not be enough to fully internalize the positive externality (or it could be too much this is always case dependent).</p>
<p>For covid-19 specifically, there is an interesting recent paper on optimal covid-19 vaccine subsidies (among other things) by <a href="https://siepr.stanford.edu/sites/default/files/publications/20-046.pdf" rel="nofollow noreferrer">Goodkin-Gold et. al. (2020)</a>.  Their model shows that optimal subsidy will depend on the reproduction rate of the disease. Higher reproduction rate makes stronger case for subsidies, while if the reproduction rate it sufficiently low there might be no need for the subsidies at all. Moreover, the authors show that optimal level of subsidies also depends on competition in the industry. Specifically, they show that generally the more competitive industry is the greater case there will be for per unit subsidy.</p>

CC BY-SA 4.0
2021-03-06T23:45:42.340Z
Great, thank you so much! Would you say that this article is good enough as an example of vaccines as a merit good and how they are under-consumed as a result of misinformation?
SU123
CC BY-SA 4.0
2021-03-06T23:50:01.060Z
@E-m10 the article provides solid basis for arguing that in most cases vaccines provide positive externality so that ticks one of the boxes. To my best knowledge the article does not specifically says why people would not want to take the vaccine, it mainly deals with the fact that vaccine has cost (the cost does not necessary need to be monetary). I think you can make the case for vaccine being merit good, and that it is underused due to missinformation, but since most of your question talked about how to internalize the externality my answer focuses just on that part
1muflon1
CC BY-SA 4.0
2021-03-07T14:16:12.187Z
I interpreted that people’s rejection of the vaccine was because at the beginning the was lack of data dot show if this was effective for people over the age of 65 which part of the population interpreted this incorrectly and thought that it wouldn’t be effective in general. So this misinformation regarding evidence of efficiency is why people wouldn’t want to take the vaccine - this is just my interpretation which may not be correct!
SU123
CC BY-SA 4.0
2021-03-07T20:55:06.157Z
@ 1muflon1♦ thank you so much for your help!
SU123
CC BY-SA 4.0
2021-03-07T20:57:18.900Z
@SU123 you are welcome, I think you assessment is right about the misinformation
1muflon1
CC BY-SA 4.0
2021-03-07T22:06:55.813Z
@ 1muflon1♦
 That’s great, thank you again, you have been most helpful!
SU123
CC BY-SA 4.0
2021-03-06T23:42:22.970Z
2021-03-06T23:42:22.970Z
1muflon1
<p>I am researching vaccinations as a merit good and I am focusing on an article which discusses how some people are rejecting one of the COVID vaccines because of misinformation about how it may be less effective than the other vaccine. Can this externality be internalised since the vaccine is free to those receiving it because for example, with the flu vaccine the externality can be internalised by providing people with a voucher to receive a free vaccine however the COVID vaccines are already free. If not, is there any other way in which I can discuss how this can be done?</p>
<p>Article Link - <a href="https://www.theguardian.com/world/2021/feb/25/acceptance-problem-as-most-oxford-covid-jabs-delivered-to-eu-not-yet-used" rel="nofollow noreferrer">https://www.theguardian.com/world/2021/feb/25/acceptance-problem-as-most-oxford-covid-jabs-delivered-to-eu-not-yet-used</a></p>
<p>Thanks</p>

CC BY-SA 4.0
2021-03-06T23:21:43.207Z
@1muflon1 Apologies, this is my first time using stack for economics. I have updated the question with a link to the article.
SU123
CC BY-SA 4.0
2021-03-06T23:25:12.977Z
No need to apologize thanks for the edit
1muflon1
<externalities><nonexpert>
Internalising an externality for a free merit good
SU123
# Internalising an externality for a free merit good

(Asked by: username_0 on 2021-03-06)

I am researching vaccinations as a merit good and I am focusing on an article which discusses how some people are rejecting one of the COVID vaccines because of misinformation about how it may be less effective than the other vaccine. Can this externality be internalised since the vaccine is free to those receiving it because for example, with the flu vaccine the externality can be internalised by providing people with a voucher to receive a free vaccine however the COVID vaccines are already free. If not, is there any other way in which I can discuss how this can be done?

Article Link - <https://www.theguardian.com/world/2021/feb/25/acceptance-problem-as-most-oxford-covid-jabs-delivered-to-eu-not-yet-used>

Thanks

**Tags:** externalities, nonexpert

> **Comments:**
> **username_0**: @username_1 Apologies, this is my first time using stack for economics. I have updated the question with a link to the article.  
> **username_1**: No need to apologize thanks for the edit  

---

## 2 answers

### Answer by username_2 on 2021-03-08. Score: 1 | Accepted answer

As you imply, a vaccine (if safe and effective) is a merit good because receipt of the vaccine by an individual has benefits to society as well as benefits to the individual. In other words there is a positive consumption externality. Therefore, if some individuals are declining to accept the vaccine when offered it, some sort of policy response to increase uptake may be appropriate. However, the appropriate policy response must have regard both to the reasons why individuals are declining the vaccine and to possible unintended adverse consequences of the policy. A subsidy attempting to internalize the externality is not the only possible approach.

The paper by [Goodkin-Gold et al](https://siepr.stanford.edu/sites/default/files/publications/20-046.pdf) referred to by username_1 makes only towards the end the very important point that individuals differ: what it terms "consumer heterogeneity" (p 42). One aspect of this is differences, eg because of age, in the benefit individuals receive from the vaccine: "heterogeneity in benefits" (pp 43-44). I could not find any consideration in the paper of misinformation as such, but there is brief mention of "anti-vax sentiment" which is given as one example of personal cost associated with receiving a vaccine even if provided free, other such costs being travel difficulties and low tolerance for pain (p 45). The paper then points out that a uniform subsidy to everyone, to encourage individuals with high personal costs to accept the vaccine might a) be effective in increasing uptake of the vaccine, but b) involve unacceptably high financial cost (what it terms "unmodeled frictions" (p 45)). It goes on to suggest that, in view of (b), subsidies targeted at particular groups might be a better policy.

A possible criticism of the paper is its subsuming "anti-vax sentiment" within the general category of personal cost. One might argue that monetary payment may not be effective in inducing individuals to accept the vaccine if they have a strongly-held view, however misinformed, that the vaccine is unsafe. An information campaign to counter misinformation might be a more effective use of public funds.

If a policy of targeted subsidies were adopted, its effectiveness would be likely to depend very much on circumstances. The paper rightly points out that targeting can yield a net benefit to society even if many of the individuals in the target group would have accepted the vaccine anyway (p 45). But it is also the case that targeting criteria, especially if the target is the misinformed, could be difficult to define and might raise issues of fairness. In a worst case, targeted subsidies could induce individuals who would otherwise have been vaccinated to delay their vaccination in the hope of receiving a payment.

> **Comments:**
> **username_1**: +1, these are all important points not mentioned in my answer. Although, I disagree on the point that incentives would not be effective for people with misinformation about vaccines. For example, there are people who consider climate change a hoax but generally they will respond to incentives (e.g. carbon taxes, taxes for non-separated garbage). Naturally, those people will have higher 'personal cost' so higher subsidy might be required relative to people who are not misinformed but I think it would be likely that monetary incentives controlling for costs would work equally well there  
> **username_2**: @username_1  I can agree that a financial incentive will be effective with _some_ people who would not otherwise accept a vaccines due to misinformation.  My point is that some people will have such a strongly held view, and perhaps also have a high enough income, that even the offer of quite a large payment wouldn't influence them,  
> **username_0**: @AdamBailey thank you very much for your help!  

---

### Answer by username_1 on 2021-03-06. Score: 1

Even if the vaccine is free it is possible to additionally internalize the externality with subsidy. That is government can just pay people to take the vaccine. Note, that even with a flu vaccine just providing voucher for a free vaccine might not be enough to fully internalize the positive externality (or it could be too much this is always case dependent).

For covid-19 specifically, there is an interesting recent paper on optimal covid-19 vaccine subsidies (among other things) by [Goodkin-Gold et. al. (2020)](https://siepr.stanford.edu/sites/default/files/publications/20-046.pdf). Their model shows that optimal subsidy will depend on the reproduction rate of the disease. Higher reproduction rate makes stronger case for subsidies, while if the reproduction rate it sufficiently low there might be no need for the subsidies at all. Moreover, the authors show that optimal level of subsidies also depends on competition in the industry. Specifically, they show that generally the more competitive industry is the greater case there will be for per unit subsidy.

> **Comments:**
> **username_0**: Great, thank you so much! Would you say that this article is good enough as an example of vaccines as a merit good and how they are under-consumed as a result of misinformation?  
> **username_1**: @E-m10 the article provides solid basis for arguing that in most cases vaccines provide positive externality so that ticks one of the boxes. To my best knowledge the article does not specifically says why people would not want to take the vaccine, it mainly deals with the fact that vaccine has cost (the cost does not necessary need to be monetary). I think you can make the case for vaccine being merit good, and that it is underused due to missinformation, but since most of your question talked about how to internalize the externality my answer focuses just on that part  
> **username_0**: I interpreted that people’s rejection of the vaccine was because at the beginning the was lack of data dot show if this was effective for people over the age of 65 which part of the population interpreted this incorrectly and thought that it wouldn’t be effective in general. So this misinformation regarding evidence of efficiency is why people wouldn’t want to take the vaccine - this is just my interpretation which may not be correct!  
> **username_0**: @ username_1♦ thank you so much for your help!  
> **username_1**: @username_0 you are welcome, I think you assessment is right about the misinformation  
> **username_0**: @ username_1♦  That’s great, thank you again, you have been most helpful!  

---

