Welfare Economics of Managing Epidemic: An Exposition

This paper reviews recent findings on the normative analysis of infectious disease control by the government and the private sector, with COVID-19 in mind. A welfare maximizing framework that links economic activity with infectious disease epidemics provides a theoretical basis for designing policies that take health and the economy into account simultaneously. Since restricting economic activity limits the spread of infectious diseases, there is a trade-off between health and economy. Lockdowns in many countries restrained economic activity on a wide scale, and the economic damage they cause is enormous. Compared to uniform restriction of activities, it may be possible to improve efficiency by taking measures to restrict activities by selecting targets. Some attributes are identified at very low cost, such as age or industry, and others are identified at non-negligible cost, such as close contact with an infected person or the presence of a pathogen. Under each of these measures, there is a trade-off between health and economy in the sense that trying to reduce human damage will result in economic damage, but it is possible to reduce both human and economic damage in comparison with uniform restrictions. There is no trade-off between across-theboard restrictions and targeted restrictions.