Economist Writing Every Day

Canadians are blocking a bridge. For Americans who like to engage in stereotypes about Canadians, this is inexplicable (even though the practice of blocking things in Canada is not new by any means). However, for me as an economist, it is entirely explicable.

Consider what vaccine mandates/passports (which is what initiated the current mayhem) do in pure economics terms: they raise costs for the unvaccinated. They do not alter the benefit of being vaccinated. All they do is raise costs. People could be more or less inelastic to this cost, but the fact that many are willing to spend time and resources (fuel, wear and tear of trucks etc.) to prevent such policies from continuing suggest that their behavior is not perfectly inelastic.

How elastic is it then? Well, we can see that by looking at what happens when we alter the benefit of being vaccinated. This is the case with vaccine lotteries. The “extra” benefits associated with a lottery is that the unvaccinated obtains the value of the vaccine plus the expected value (i.e. the probability) of winning a particular prize. One recent paper in Economics Letters finds that for $55, you can convince an extra person to be vaccinated. That is basically the cost of administering a lottery plus the prizes themselves. That is a relatively cheap way to increase the benefit for the unvaccinated in order to have them change their mind. Another paper, in the American Journal of Health Economics, finds a similar results by concentrating on the Ohio vaccine lottery. The difference is that the amount is $75 instead of $55. Still, pretty cheap for an extra vaccinated person and the generally high social benefit of a vaccine in terms of avoided costs of infections/hospitalizations/deaths.

Thus, we can say that behavior is quite elastic. But this is where the rub comes. When you raise the benefits in this case, the story is over. There is nothing else that happens after that. When you raise the costs, people might resist and adopt other measures to avoid the costs. This includes blocking bridges on the US-Canada border. And what is the social cost of that attempt at avoiding the cost of the coercive private-cost-increasing policy? Pretty high. Probably higher than the cost of a lottery system or other voluntary programs that play with the marginal private benefit of being vaccinated.

The point I am trying to get across to you is quite simple: persuasion works because it essentially increases the perception of benefits from doing X or Y activity. Coercion is impose a private cost of not doing X or Y with the potential downside that people respond in ways that create socially detrimental outcomes. Yup, coercion isn’t cheap.