The sluggish vaccination rates that we have witnessed in the weeks leading up to Victoria’s fourth lockdown have been attributed to Australians being happy to play a waiting game. The switch from vaccination apathy to vaccination frenzy, in the wake of Victoria’s fourth lockdown, provides a teaching moment.
In their effort to mitigate the contagion of Covid, governments around the world have imposed a number of drastic measures, including mandatory use of masks, curfews, border shut-downs, and quarantines. To varying degrees, all these measures have been the subject of heated debate because they restrict fundamental individual rights. Nonetheless, the discussion has largely overlooked the role of Covid restrictions in shaping people’s perceptions and vigilance choices. In this article, we explain the importance of this role.
What is the economic problem? As economists, we think that contagion management involves solving a market failure caused by an externality: a situation where people’s well-being is affected by the choices of others. When people are out and about they meet other people whose infection status is unknown. Furthermore, they cannot distinguish their own infectious status, unless they have been tested since they might be infected and asymptomatic! In this case, their interaction with others imposes a negative externality on society.
The chances of getting infected can be mitigated by making vigilant choices (wearing masks, practicing social distancing, using alcohol sanitisers, etc.). Vigilance acts in two ways: it reduces the probability that the vigilant individual gets infected, as well as the probability of infecting others, in case the vigilant individual is infected. This has consequences: in the absence of restrictions, individuals’ vigilance is too little because they will not weigh properly the social impact of their behaviour. As society and individuals’ interests are misaligned, almost inevitably, individuals will not make the best choices from society’s point of view.
How do Covid restrictions help? Essentially, Covid restrictions are quotas: they directly introduce minimum vigilance standards. Recognising that Covid restrictions’ efficiency might be questionable, especially in an environment full of uncertainties, we argue that they have a benign collateral role in shaping the public’s perception of contagion risk. This is crucial because individuals’ perceptions determine their vigilance effort. In places like Australia, where the number of cases is low, people think that being vigilant is not worthy. On the other hand, in places like India or Brazil, people are much more alert and vigilant.
Covid restrictions and management of perceptions. Covid restrictions give individuals’ perceptions a nudge to adjust their vigilance effort in the right direction. The effect of government restrictions on individuals’ perception is not only plausible but has already been documented in places like China (see Duan et al. 2020). Strict restrictions cue individuals to exert more vigilance—as if, at least partially, they become more aware of their contagion externalities. The change in the public’s attitudes towards vaccination across Australia during the first 48 hours of Victoria’s fourth lockdown has provided a dramatic illustration of this point.
But can governments systematically affect perceptions in any direction they want? Probably not if people can check the veracity of claims. Does this mean that governments cannot manage perceptions to incentivise vigilance? Our recent research suggests that one thing does not imply the other.
We analyse how governments can manage perceptions about the contagion situation to incentivise individuals to be more vigilant. In situations in which individuals’ behaviour can jump from inaction to frenzy, there is room for the government to benefit from managing individuals’ perceptions.
Abrupt jumps from inaction to full alertness can be led by “complementarity” (individuals’ vigilance is worthy as long as their neighbours are vigilant as well), peer-pressure, “information cascading” (once a few people take the lead, the rest just follows), and “correlation neglect” (“telling and re-telling stories” affects individuals’ perception). In these scenarios, Covid restrictions, additionally to their direct effects, can credibly signal to the public a sense of alertness that is strong enough to trigger vigilance. From a practical point of view, however, the economic consequences of restrictions must be included in the equation as well.
In summary, individuals do not have the right incentives to be enough vigilant because there is misalignment between individuals’ incentives and what is best for them to do from the society’s point of view. By affecting the public’s perception, fine-tuning the circumstances under which strict restrictions are imposed, governments can align better individual choices with what is best for society.
Dr Jonas Hedlund, Assistant Professor of Economics, University of Texas at Dallas.
Dr Allan Hernández-Chanto, Lecturer in Economics, University of Queensland.
Dr Carlos Oyarzún, Senior Lecturer in Economics, University of Queensland.
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