  In this research, we develop a framework to analyze the interaction between
the economy and the Covid-19 pandemic using an extension of SIR epidemic model.
At the outset, we assume there are two health related investments including
general medical expenditures and the other for a direct investment for
controlling the pandemic. We incorporate the learning dynamics associated with
the management of the virus into our model. Given that the labor force in a
society depends on the state of the epidemic, we allow birth, death, and
vaccination to occur in our model and assume labor force consists of the
susceptible, vaccinated, and recovered individuals. We also assume parameters
in our epidemic compartmental model depend on investment amount for directly
controlling the epidemic, the health stock of individual representative agents
in the society, and the knowledge or learning about the epidemic in the
community. By controlling consumption, the general medical expenditure, and the
direct investment of funds for controlling the epidemic, we optimize the
utility realized by the representative individuals because of consumption. This
problem is nontrivial since the disease dynamics results in a non-convex
optimization problem.
