The mosquito-borne Zika virus has been declared a “Public Health Emergency of International Concern” by the World Health Organization.
The virus not only appears to severely harm unborn children but is also hurting the economies of many Latin American and Caribbean countries. The World Bank estimates Zika will cost the world US$3.5 billion in 2016.
Three and a half billion dollars is a huge amount of money. How did the World Bank calculate this figure? How do we put a price tag on Zika and other health catastrophes like Ebola, dengue fever or even more common problems like the flu? Can we even trust these figures?
In general, these figures are generated by adding together estimates of four categories of spending: direct outlays, lost productivity, loss from death and the impact of avoidance.
The first item needed to calculate the overall cost of a disease is to estimate the amount spent fighting it. These costs include payments for extra doctors, nurses, drugs and prophylactic treatments.
Currently, much of Zika’s direct outlay is spent trying to control mosquitoes. In Brazil, the government enlisted the army to help battle the spreading virus. The World Bank is providing $150 million to combat the Zika virus. All of this spending is included in the $3.5 billion.
In the U.S., President Barack Obama requested $1.8 billion to understand and fight the Zika virus, but this spending is not included in the $3.5 billion since Obama’s request was rejected by the House Appropriations Committee.
When people get sick they either miss work or are less productive while working.
There is no economic impact if only a few people get sick and there is no mass panic. However, when epidemics spread wildly, productivity in entire cities, regions and countries can plummet.
To handle this lost productivity, the World Bank assumed about four million people will be infected with Zika in 2016. Since roughly 20 percent of the infected get sick, the bank assumed 750,000 people in Latin America and the Caribbean would lose one week of paid work and added this amount to the total.
However, these lost wages, like the direct outlays, comprise only a small portion of the $3.5 billion.
A small number of people infected with Zika come down with Guillain-Barré syndrome. This syndrome results in patients having very weak muscles and, in more severe cases, paralysis, but the syndrome is rarely fatal and typically goes away slowly.
The World Bank’s $3.5 billion estimate does not include anything for the Guillain-Barré syndrome, even though this disease is costly to treat, since so few are impacted.
Loss From Death
Forensic economics tries to determine the value of a life. This is very different from how much do you value your life. Instead, forensic economists ask, if we want to make the world safer and prevent one more person from dying, how much would society pay? The figure is important because stating that life is priceless, which in a moral sense is true, means society should spend an infinite amount of money to prevent even a single death, which is not economically possible.
There are large numbers of forensic studies producing a range of estimates. For example, the U.S. Transportation Department currently estimates saving a life is worth over $9 million when making decisions about the safety of U.S. roads and bridges. The Environmental Protection Agency uses a figure of $7.4 million when determining the value of clean air.
While the Zika virus does not appear to kill anyone, the value of life estimates are still useful because many babies born to pregnant mothers with Zika have microcephaly.
Microcephaly is a condition in which a baby’s head is much smaller than expected, and the brain develops abnormally, resulting in an incomplete life. Multiplying the statistical value of a life in Latin American and Caribbean countries by the number of affected babies is another economic cost of Zika.
Given that only a small number of babies have been infected, the World Bank did not include any estimates for death or severe impairment in its $3.5 billion estimate.
When disease strikes, people react by avoiding areas with the disease. For example, when flu runs rampant through a school, many parents keep their children home to avoid infection.
The Zika virus is virulent in many countries frequented by tourists. Most of the $3.5 billion impact is because tourists are expected to avoid Caribbean and Latin American countries associated with the disease.
One of the most important tourist events will be the 2016 Summer Olympics being held in Brazil from August 5 to 16. Just after Brazil was awarded the games, the Olympic Committee forecast 480,000 tourists would flock to Rio.
These numbers look excessively optimistic since both athletes and tourists are reconsidering attending, and without free-spending foreign fans there is the potential for a multi-billion-dollar fiasco.
While the World Bank believes that avoidance issues are the biggest factor in their $3.5 billion cost estimate, they caution that if tourists exhibit widespread avoidance, its estimates might go dramatically higher.
Should You Worry?
If you are a pregnant woman or a couple trying to conceive a baby, you should definitely be concerned about Zika if you live in or are visiting Latin America or the Caribbean. For everyone else, current medical information indicates Zika should not be a major worry, especially if you cover up with long pants and long-sleeved shirts and sleep under a mosquito bed net.
Nevertheless, fear of the unknown, especially fear of a new disease, can drive tourists away and cause economic devastation in fragile economies.
If you are well past your childbearing years, this might be the perfect time to see the Olympics for a cheap price. You will be providing Brazil with an economic shot in the arm and help ensure the World Bank doesn’t increase its $3.5 billion estimate for the Zika virus.