The US state of Ohio has recently announced an innovative scheme to encourage more people to take the Covid-19 vaccine. From May 26th, all Ohioans over the age of 18 who have received the first dose of their Covid-19 vaccine will be entered into a lottery with the chance of winning $1 million. In total, five lucky people will be selected. Sounds like a no brainer right… the chance to win a million dollars and significantly reduce your chances of catching a deadly virus! Who wouldn’t want to sign up?
Well that’s part of the problem, and hence why governor Mike DeWine is willing to give away so much from the state’s coffers. The number of people signing up to receive the vaccine in Ohio is slowing drastically and the state is still far away from reaching herd immunity. With many people still apprehensive about the efficacy and safety of receiving the vaccine, DeWine is hoping that a large cash incentive might persuade some to change their minds.
Medical experts around the world agree that getting vaccinated is key for a return to normality. For every person who receives the vaccine, they not only drastically reduce the chance of catching the virus themselves, but they are also protecting the hundreds of others who they come into contact with each day. Vaccines are the classic case of positive externalities, and this intuitive scheme set up in the state of Ohio might sound crazy on paper, but it is possible that the price tag of $5 million may be nothing in comparison to the social cost of not receiving it.
THINK LIKE AN ECONOMIST!
Q1. What is meant by the term positive externality?
Q2. Examine the likely effectiveness of this policy in encouraging more people to take the Covid-19 vaccine.
Q3. Draw a diagram to show how the market failure could be corrected by this government initiative.
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