At a time when avian influenza is spreading in numerous countries, the recent research of Malani* and Laxminarayan** has struck my particular interest. The paper was presented at the University of Chicago Law and Economics Workshop and examines the incentives of countries to invest in disease surveillance and to report possible outbreaks of diseases using a game-theoretic model. It also evaluates the different policy instruments the World Health Organization (WHO) uses to encourage countries to detect and report the outbreak of diseases.
The policy instruments of the WHO that are discussed include subsidies for surveillance, medical assistance to control outbreaks, and trade sanctions for failure to report outbreaks. In addition, the paper considers the possibility of conditioning surveillance subsidies on the WHO’s right to audit a country’s surveillance measures.
The countries’ incentives to disclose an outbreak of a disease are conflicting. On the one hand, international assistance in coping with a disease and preventing an epidemic can be of great economic value. On the other hand, reporting an outbreak can inflict great economic costs by triggering trade sanctions and embargos by other countries. Through backward induction, these incentives also influence the country’s decision on whether and how much to invest in surveillance. Only if reporting the outbreak seems desirable, a country will consider it in its interest to detect the disease by investing in surveillance. And if reporting seems harmful, limited surveillance could be desired.
Using a game-theoretic model to compare the costs attached to the different reporting and surveillance investment decisions of a country, the paper reaches the following conclusions about the effects of WHO policy instruments:
Medical assistance after reporting induces a country to report an outbreak by easing the costs of the disease and by helping to prevent an epidemic. However, the bigger the medical resources of that country, the smaller the increase in incentive will be.
Unconditional subsidies for surveillance create moral hazard problems. The recipient will reduce his own investments in surveillance.
For countries that already have an incentive to report an outbreak, subsidies for surveillance conditioned on WHO auditing will have the same effect as unconditional subsidies. But conditional subsidies will even discourage those countries, that do not intend to report, to invest any own resources in surveillance. For those countries, conditional aid for surveillance means that an outbreak will always be known to the world due to WHO auditing which will likely bring about sanctions of trade partners.
The effect of conditional subsidies for surveillance on the decision to report or not will largely depend on the size of the subsidy. Due to limited WHO resources the subsidies will often not reach the critical amount necessary to induce the country to report.
The effect of punitive trade sanctions on a country’s incentives is limited if the country in question is too poor to experience much decline in exports beyond that caused by the disease itself. Furthermore, such sanctions against a poor country weakened by disease will encounter moral and political resistance. However, the influence of sanctions on incentives greatly depends on what triggers the sanctions. In contrast to sanctions that follow the report of an outbreak, sanctions that are triggered by a country’s probability of an outbreak can actually increase the incentive to report. Such pre-emptive sanctions can be as informal as consumer reaction to rumors about dubious hygienic conditions in the agricultural industry of a particular country.
With the ongoing increase in global trade and travel, it is unavoidable that disease control, as a global public good, requires global solutions in form of international legal protections. This research gives valuable insights in the effects and possibilities of global health policy design. However, it also points to limits of the role of law in this area and the possible abilities of consumers to influence countries through informed choices about what to buy.
*Associate professor at University of Virginia Law School and visiting professor at the University of Chicago Law School.
**Fellow at the Resources for the Future.