🔺Covid 19: Herd Immunity, Vaccines, Preventative Measures, and Country Models

There are roughly 22 million confirmed Covid-19 cases globally, 13 million have recovered, and 800,000 have died. As a percentage of the total population, the number of confirmed Covid-19 cases is only 0.2% of the global population. In percentage terms this seems inconsequential and not a cause for concern on the surface. In fact, by itself, it may even seem that governments are overreacting. However, the event is not isolated and is certainly a pandemic considering how widespread infections have become. Moreover, pandemics follow a typical S-curve pattern and grow non-linearly for a period of time – this is what you do not want to wait and see happen. Some of the bigger questions facing governments are how many deaths are too many and how to balance Covid-19 with economic growth?

While there is not a right answer, any rational government would consider one death as too many in any pandemic scenario. The more the infection spreads, the more deaths that occur, the less credible the government becomes, especially if the government tries to manipulate numbers, reduce testing availability, or pretend it doesn’t exist. Taken to an extreme, a pandemic has the ability to overthrow the government if not managed properly. A pandemic creates an inherent catch-22 for the government because the implementation of masks and social distancing causes many to feel as though their civil liberties are being violated while fueling conspiracy theorists, yet, doing nothing and letting infections and deaths increase will lead to outrage and reduced credibility and trust of the government itself, although people will then realize the pandemic is not a hoax at which point it is too late. Looking at the intangible costs, the government has but no choice to mandate lockdowns, the wearing of masks, and social distancing as a preventative measure, lest it risk its own insolvency and economic collapse.

That being said, suppose the United States decided that everyone should get infected, build antibodies, and then we will be fine as a result of heard immunity because our body created its own vaccine. There are roughly 6 million confirmed cases, and 200,000 deaths against a population of 330 million. If you assume the death rate increases from 0.0006%-to-0.005% to achieve heard immunity, then roughly 1.6 million people would die. Clearly, that would never happen because action would be taken by then.

The other alternatives include 1. Lockdowns/mask mandates/social distancing, 2. Mask mandates/social distancing, or 3. Optional mask mandates/social distancing. The countries that have succeeded so far in keeping transmission rates low followed steps 1 and 2 while the United States has followed something similar to option 3. Additionally, those countries that have followed steps 1 and 2 have seen a rebound in their economies as a result of sound monetary and fiscal policies coupled with strong social safety nets.

Ultimately, preventative measures create a heard immunity while also buying time to develop an efficacious vaccine or cure. Moreover, if the sole purpose is to profit from a cure or vaccine then the incentive structure could become perverted and induce the continuation of being sick which is counterproductive and a country may follow something similar to option 3 or even lesser as a result because more sick people means more profits, which is inherently unethical and nonsensical.

Published by Diamond1

I have an extensive background throughout the financial spectrum with high-level experience on the sell-side, high-net worth private banking, portfolio management, international finance, public pensions, VC, PE, and economics. I enjoy working and collaborating with people that I admire and trust.

"Fit Models to Problems, Not Problems to Models"

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