Vaccine Mandates

There has been widespread debate as to whether Covid-19 vaccines should be mandated by the government, with polarizing opinions across the country. Vaccines have a positive consumption externality, the social marginal benefit of receiving the vaccine is greater than the private marginal benefit.  However, many scientific studies have estimated that this positive consumption externality will be reduced once the country reaches herd immunity (estimated to be around 80%). Similar to Gruber's example of global warming, increases in vaccinations produce diminishing marginal returns.  

Mandating vaccines would be considered a collective action response to the externality. Due to the diminishing marginal rate of returns to increases in vaccinations, a government mandate is not the economically efficient solution to the externality. A Coasian solution would define property rights and determine who is liable. We can see examples of this occurring within the private sector. For instance, some companies are offering to pay their employees to receive the vaccine. In this case, companies are assuming liability and have determined that reducing the risk of Covid-19 spread is more valuable than the money they are willing to pay the employees. The employees will get the vaccine if the private marginal benefit with the addition of monetary compensation outweighs the private marginal cost of the vaccine. In this scenario, the employees retain property rights over their body but they have increased incentive to receive the vaccine. In other words, the social marginal benefit would equal the private marginal benefit. This is an example of a Coasian solution internalizing the externality.