Back in 2017, we published this piece on the disincentives for countries suffering from epidemics to cooperate with others in reporting and tracking its spread. We think it deserves another close look. — Peter Passell

It is one of the sobering ironies of modern epidemiology: the threat of global pandemics looms large against a backdrop of a diminishing overall burden of infectious diseases. The body count — some 900 victims — from the 2003 outbreak of severe acute respiratory syndrome (SARS) was the same as that from malaria in an average 12-hour period that year. Yet, SARS caused a complete shutdown of trade and travel in East Asia and cost the global economy close to $40 billion in 2003 alone. In 2015, the United States spent $5.4 billion to tackle Ebola, a disease that killed just one American and sickened four more — arguably the highest expenditure per case in any nation's history.

With SARS, the dread factor was the ferocious speed at which a newly identified viral infection spread across borders, its effects being felt across an ocean in Canada before the outbreak was quashed. With Ebola, a familiar viral hemorrhagic fever, the factor precipitating a global reaction was the sheer terror of importing a disease that killed over a quarter of its victims. By comparison, until 2014, the United States had spent less than a million dollars annually to tackle rising microbial resistance to antibiotics, which by the government's own statistics resulted in the deaths of an average of 63 Americans a day.

Sometimes pandemics do live up to their mythic reputations. The 1918 flu pandemic was the single most catastrophic health event in modern history. It resulted in the deaths of 50 to 100 million people (3 to 5 percent of the world's population) and temporarily lowered Americans' life expectancy by 12 years. However, the examples above make it pretty clear that a pandemic would not have to take millions or even hundreds of thousands of lives to shut down international commerce. Even a few thousand deaths over a short period would be sufficient to inflict significant damage on the global economy.

Moreover, in developing countries with weak infrastructure and government institutions, the threat could extinguish decades of growth. The two years spent fighting Ebola have effectively destroyed the health care systems of Liberia and Sierra Leone, setting back childhood immunization rates and undermining progress in health care indefinitely.

More Trouble Ahead

Expect more of the same in the future. Increased human mobility has accelerated the rate at which microbes are transmitted around the world. The resulting infectious-disease outbreaks, ranging from SARS to influenza H1N1 to MERS-CoV to Ebola to Zika, have challenged the ability of national and global systems to respond. Meanwhile, the conditions for disease transmission have only grown more favorable. Aedes aegypti, the so-called (for obvious reasons) yellow fever mosquito that has also become the favored vehicle for the dengue, chikungunya and Zika viruses, can now be found in the lower half of the United States. The Asian tiger mosquito Aedes albopictus, which serves as an efficient vector for at least 23 arboviruses that cause dengue and encephalitis (among other diseases), was first discovered in the United States in 1987. It is now on the wing in 678 counties in 25 states.

The ominous news keeps on coming. Nearly a third of the world's population lives in areas that are environmentally suitable for the spread of Zika. This includes more than half of Latin America — where the virus is now circulating — as well as parts of South and Southeast Asia, northern Australia and a broad swath of equatorial Africa.

A less-examined factor that is leaving the globe more vulnerable to the rapid spread of infectious disease is the massive increase in animal herds raised for food. Demand for animal protein is likely to double between now and 2050. This worries public health officials for two reasons. First, raising large quantities of poultry and hogs in close proximity to humans amplifies the risk of animal-to-human transmission of diseases. Second, the use of antibiotics in animals at sub-therapeutic concentrations for the purposes of promoting growth — and ostensibly, preventing disease — is expanding rapidly.

This profligate use of antibiotics is accelerating the evolution of resistant microbes, which affects humans both directly and indirectly. Of course, it puts us at greater risk from resistant microbes. But it is also undermining the efficacy of antibiotics in the treatment of animal disease, which threatens both the supply of food and the livelihood of hundreds of millions of workers engaged in raising and processing food.

Consider, moreover, that cross-border trade in live swine is common, both to produce meat and to acquire breeding stock. These pigs rarely travel alone, taking with them an assortment of influenza viruses. Indeed, there is a near-consensus among the experts that pandemic influenza originating in animals is the most ominous health threat faced by humans.

The Economics of Pandemic Preparedness

For all the intermittent worry about communicable disease outbreaks, incentives for national governments to prepare for a black-swan event like pandemic influenza, which has a low probability of occurrence yet would generate appalling damage if it did, are weak.

To be fair, the resulting neglect is not necessarily myopic. All countries face immediate demands on financial resources, including the clear and present danger of chronic diseases. Eliminating, say, malaria in countries with even moderate incidence of it would generate immediate benefits in terms of public health and could trickle down into tourism development. By contrast, improving the ability to detect and respond to an outbreak of influenza generates no visible benefit. Then, too, much of the benefit of investing in surveillance and reporting accrue to other countries — an "externality" that is rarely valued by the country making the investment.

That's why international institutions that can serve as a fail-safe for information flows are so important. But these are not reliable in the face of the current political backlash against global governance and coordination mechanisms — not to mention ongoing reluctance to adequately fund the World Health Organization (which admittedly suffers from its own set of governance problems).

With limited funds available for multilateral pandemic preparedness, then, we should pay closer attention to the impact of current planning and interventions on incentives for individual countries to prepare and promptly report outbreaks. I offer some ideas in structuring mechanisms for global preparedness and reporting.

First, just as insurance against auto accidents generates "moral hazard" — with autos, for example, insurance reduces the incentive to drive carefully — designers of global mechanisms to buffer the impact in the event of an outbreak should consider those mechanisms' perverse effect on incentives to prepare for a pandemic. That's not to say there is no good reason to have a global pandemic-response system in place. But it would also make sense to build in penalties for countries that fail to prepare adequately and must lean more heavily on outside help if the chickens do come home to roost.

Second, there is evidence that countries respond to external incentives in deciding whether to report infectious-disease eruptions. Consider one example. Following an outbreak of meningococcal meningitis during the Hajj (the annual Islamic pilgrimage to Mecca), starting in 1988, Saudi Arabia required pilgrims to be vaccinated. But the vaccine was expensive ($55 per dose in 1987), and enforcement was spotty. The Saudis focused on surveillance of pilgrims from countries with a high reported incidence of the disease. And by no coincidence, poor countries of sub-Saharan Africa became far less inclined to report cases.

But this sort of perverse incentive can be turned on its head. The creation of a World Health Organization program in 1996 to subsidize the vaccine in localities reporting epidemics led to a sharp increase in reports from sub-Saharan countries that had previously chosen to suppress the evidence. Strong surveillance and prompt reporting lie at the heart of an effective strategy to respond to pandemics. Mathematical models have suggested that it may be possible to contain an emerging pandemic of avian influenza if detection and reporting occur within approximately three weeks of the initial case. The catch, of course, is that while the World Health Organization is responsible for coordinating the global response to human cases of avian influenza, decisions about surveillance and reporting, as well as the initiation of containment efforts, are the province of national governments.

Third, the primary means countries choose to protect themselves in the event of outbreaks elsewhere is through sanctions on trade and travel. And, as noted above, such sanctions impose enormous costs on countries reporting outbreaks. The result is that infected countries face powerful disincentives to prompt reporting. For example, when Peru disclosed an outbreak of cholera in 1991, its South American neighbors imposed an immediate ban on Peruvian food products. The $700 million loss in exports and an additional $90 million loss in tourism far exceeded the domestic health and productivity costs of the epidemic.

Incentives for reporting don't always work in one direction, though. In some cases, countries promptly report outbreaks because they believe the information will probably leak anyway and they want to be able to influence how it is reported and interpreted. Furthermore, reporting an outbreak may result in international assistance for containing it. In the Peruvian outbreak of cholera, speedy aid in the form of rehydration salts, saline solution and antibiotics helped to significantly reduce the death rate. The bottom line: since sanctions are after-the-fact measures to control outbreaks and have unintended consequences, we should rely on them as little as possible to contain those outbreaks.

Fourth, incentives to report an outbreak once it has been detected put the cart before the horse, since the outbreak must first be detected. Incentives to invest in surveillance depend on whether or not a country really wants to report an outbreak promptly. These incentives are driven in part by the direct value of early detection to the individual country and in part by the likely consequences of making the information available to outsiders.

The more onerous the anticipated sanctions from abroad, the less likely a country will be inclined to invest in surveillance. By the same token, the higher the perceived benefit of international assistance in reducing the cost of an outbreak, the greater the likely investment. Current international mechanisms to encourage better reporting of disease have, by and large, ignored this economic dilemma and the strategic behavior it invokes in countries with emerging outbreaks.

Investments in surveillance also depend on the likelihood that detected outbreaks will produce a significant epidemic. The more a country believes a disease will arise and spread, the more significant the investment in surveillance. However, this investment can be inhibited by the likelihood of false positives – the alleged detection of a disease when none exists. Thus, a tradeoff exists between investing in increased surveillance and investing in more-accurate surveillance.

A government's decision on whether to report an outbreak can be modeled as a signaling game in which a country has private but imperfect evidence of the outbreak. An important conclusion from such modeling is that not all sanctions necessarily discourage reporting. Sanctions based on fears of an undetected outbreak (false negatives) encourage disclosure by reducing the relative cost of sanctions that follow a reported outbreak. Moreover, improving the quality of detection technology may not promote the disclosure of an outbreak because the income lost by reporting truthfully is that much greater. Finally, informal surveillance is an important channel for publicizing outbreaks and functions as an independent yet imperfect signal that is less likely to discourage disclosure. In sum, obtaining accurate information about potential epidemics is as much about reporting incentives as it is about detection technology.

What to do

It's time to think seriously about how to create stronger incentives for preparedness and reporting. One possibility: create a global audit agency for pandemic risk along the lines of a securities-rating agency like Moody's or S&P. But why would countries participate in such a mechanism? Recall Nobel economist George Akerlof's famous "market for lemons" analysis, in which sellers of high-quality used cars choose to exit the market if buyers cannot distinguish their superior offerings from those of less-scrupulous sellers. Their exit further lowers the average quality of cars on the market and leads to further unraveling until the only cars left for sale are the lemons that consumers fear most.

In the analogous case of uncertainty about nations' will and capacity to manage potential pandemics, the availability of an audit mechanism would trigger a "reverse-lemon" effect. Once some low-risk countries are audited, the rest of the world would revise upward its threat assessment for countries that chose not to be audited. And this would increase the incentives for other countries to get on board.

A complementary approach would be to establish a global insurance fund that countries could use to purchase coverage against pandemic-related economic losses. Insurance would extend to trading partners that inadvertently imported the disease. Premium size would be keyed to the risk of unreported disease. Assistance to low-income countries that simply couldn't afford to buy insurance would focus on measures that helped low-income countries qualify for reduced premiums rather than directly subsidizing their premiums.

* * *

As (a) climate change increases the efficiency of insect vectors once confined to the tropics, (b) the demand for animal-based diets increases, and (c) travel becomes more affordable for more people, the risk of outbreaks is plainly increasing. And the potential consequences are grave in terms of economic losses — not to mention public health. The incentives to protect against pandemics are not nearly strong enough, given their awesome power to destroy economies. It's time we stop treating every new pandemic as if it were an unanticipated fluke.