Behavioral epidemiology: An economic model to evaluate optimal policy in the midst of a pandemic

TL;DR

This paper develops an economic-epidemiological model combining disease dynamics, government policies, and individual behaviors, showing that prolonged intermediate lockdowns and aggressive testing are optimal strategies to balance health and economic outcomes during a pandemic.

Contribution

It introduces a combined model of epidemiology and economics calibrated with US data, highlighting the effectiveness of prolonged lockdowns and testing, and the importance of centralized control.

Findings

Intermediate prolonged lockdowns are socially optimal.

Aggressive early testing could have improved pandemic management.

Centralized control reduces infection spread.

Abstract

This paper combines a canonical epidemiology model of disease dynamics with government policy of lockdown and testing, and agents' decision to social distance in order to avoid getting infected. The model is calibrated with data on deaths and testing outcomes in the Unites States. It is shown that an intermediate but prolonged lockdown is socially optimal when both mortality and GDP are taken into account. This is because the government wants the economy to keep producing some output and the slack in reducing infection is picked up by social distancing agents. Social distancing best responds to the optimal government policy to keep the effective reproductive number at one and avoid multiple waves through the pandemic. Calibration shows testing to have been effective, but it could have been even more instrumental if it had been aggressively pursued from the beginning of the pandemic. Not having any lockdown or shutting down social distancing would have had extreme consequences. Greater centralized control on social activities would have mitigated further the spread of the pandemic.