The outbreak of measles among unimmunized middle class children who visited Disneyland reopened an important debate that pits the freedom of parents to choose how to raise their children against their responsibilities to their own children and to others with whom they may come in contact. Much of the debate has been about forcing those who cite religious or philosophical objections to vaccines to recognize what "science says" about the benefits.

On this point, as a grandfather I would definitely chime in, but as an economist I recognize that parents often make choices about raising their children that "science says" could harm them—letting them play contact sports, race dirt bikes, and eat potato chips. Yet we have no social consensus and no strong economic argument for not giving parental autonomy the benefit of the doubt.

But there is another consequence of failure to vaccinate a child: a greater risk of transmitting an infectious disease like measles to others, many of whom could not be vaccinated because they are infants or have compromised immune systems.  (This issue of risk to others would not arise for diseases like tetanus that are not transmitted from human to human.) Economists apply the term "negative externality" when one person's behavior negatively affects others in ways not mediated by a market.

There is a consensus among economists that one proper treatment for a negative externality is to impose a tax or fine on the person who generates it. The tax should ideally be in an amount equal to the cost of the harm done.

The idea of fining the non-immunized may sound strange, and it will probably disappoint both the more passionate pro-vaccine and anti-vaccine camps, but it has historical precedent. In 1905, the state of Massachusetts imposed a $5 fine on persons unwilling to get the smallpox vaccine, a measure that was eventually upheld by the US Supreme Court. But even if we accept the principle of a fine, there are still the questions of how high it should be and who should have to pay it.

To calculate the size of the fine, we first need a count of the number of actors generating the negative externality (unvaccinated children, in this case). The California Department of Public Health estimates that number in that state to be about 40,000. Then we need an estimate of the harm done as a result of their behavior. Let us say, based on the Disneyland experience, this practice causes 300 cases of measles that would not have happened had these children had their shots.

Finally, and most challengingly, we need to attach a dollar value to the harm done by those 300 cases. The epidemiology of measles predicts one death on average per 300 cases, plus the morbidity associated with the disease and its consequences, plus the private cost of treating them and the public health costs of tracking the epidemic. A rough estimate is that the public and private health care costs for 300 cases are about $3000 per case, for a total of about $1 million.

Then there is the cost of one premature death and long term morbidity for a small number of people. Let us put that at about $8 million. (Economic estimates of the value of life of the average person are in the range of $4 to $8 million, so even just considering the value of avoiding the one death we are in the right ballpark.) Long division then tells us that the ideal penalty ($5 to 9 million divided by 40,000) should be about $125 to $225 per unvaccinated child.

What is desirable about such a tax penalty approach? For one thing, it avoids having to ask why the healthy child is unvaccinated—whether the reason is religion, philosophy (though Aristotle had little to say about measles), or just an unwillingness to deal with the emotions of taking a child to the pediatrician for a shot, all would be penalized the same.

The Affordable Care Act requires measles vaccination to be covered in full by all insurances, so there is no issue of affordability. The proceeds of the tax could in principle be used for any good public purpose, but it might make sense to use them to help anyone who does contract measles.

The main uncertainty is how this kind of a fine would affect the immunization rate. Economists believe that, despite the presence of absolutely convinced parents on the talk shows, there is always someone on the margin—so some people would switch to being vaccinated. The tax would work; it is just a question of how well.

The main potential defect is that a tax at this level may not be enough to persuade a lot of parents to change behavior. A true believer in economic theory would say that this is not a problem if the measurement of harm is accurate. To increase the tax further would harm some Americans more than it helps others, and there is no economic rationale for doing that.

A more reasonable approach it might be to start the tax at some moderate level, like $200, and see what happens to the number of families that resist vaccination. If some important part of the problem remains, the question will be whether we have undervalued the adverse health consequences or overvalued the harm of the tax to parents. That question—the one of values—can then be addressed with the precision it deserves.


Editor's Note: Cross-Posted on the Voices@LDI blog of the Leonard Davis Institute of Health Economics of the University of Pennsylvania.


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