The economist and the doctor: Jean Tirole’s parallel and contrast

Both of us, Patrice and Gatien, have started to read the recent book (May 2016) of Jean Tirole, a French economist, Nobel Prize in Economics in 2014, entitled Economics of the Common Good (published in French: “Économie du bien commun”). In the first pages, we come across a parallel between economics and medicine, that calls upon us because it touches at the heart of our idea for this blog, the relations between the economy, education and health. Hence, we present this brief excerpt without waiting for coming across other relevant developments throughout our reading (we may return to it in future posts as it comes).

Jean Tirole on economics and medicine

“The contrast between economics and medicine here is striking: in public opinion, unlike the “dismal science” [understand economics], medicine is – rightly – seen as a profession dedicated to the welfare of people (the English expression “caring profession” is particularly appropriate here). Yet, the purpose of economics is similar to that of medicine: the economist, just like the oncologist, diagnoses and, if necessary proposes the most appropriate treatment given his (obviously imperfect) knowledge and recommends no treatment if it is not necessary.

The reason for this contrast is simple. In medicine, the victims of the side effects are the same people who take the treatment (except in the field of epidemiology, with the consequences of antibiotic resistance or lack of vaccination); so the doctor will remain faithful to the Hippocratic oath and recommend what he deems to be in the interest of his patient. In economics, the victims of the side effects are often people different from those to which the treatment is applied, as the example of the labour market illustrates very well. The economist forces himself to think also of the invisible victims, thus getting sometimes accused of being insensitive to the suffering of the visible victims.” Jean Tirole, Économie du bien commun, Presses universitaires de France, 2016, p. 40. (Translation is our own)

Accounting for indirect effects

The comparison of who is affected by the side effects from doctor’s and economist’s prescriptions looks particularly interesting. The side effects of a medical treatment are generally felt by the same person who receives the treatment. The recommendation of treatment is the result of balancing the primary expected effect and possible and known side effects. On the economic side, the side effects of the implementation of a measure are usually felt by a group of people to which the measure does not apply, primarily because of the explicit exclusion of the population not part of this group.

Before taking an example, we note immediately a difference in the “public” subject to the administration of a medical treatment and the one concerned with an economic treatment: the medicine affects the individual while the running of the economy concerns groups of individuals, such as, for example, the unemployed, youth, women, non-graduates, all of which may be divided into  subgroups according to other criteria. This largely explains, in our view, the contrast statement by Jean Tirole. Medical treatment will seek to correct a diagnosed health problem, but may cause other problems in the same person. The economic treatment will seek to address the particular problems of a group, risking thereafter to affect adversely the situation of one or more other groups.

The minimum wage policy

Consider an example that brings us to the heart of an economy and education issue: the establishment of a minimum wage or a significant increase in its level. One can think of the present discussion relayed in many media, in North America, about raising the minimum wage to $ 15 – just three examples in The Economist, the New York Times and the CBC. Without going into the depth of the argument, the essential element put forward to justify the introduction or an increase of a minimum wage in the economy is to provide income above the poverty line for full-time workers.

On the other hand, by raising the cost of labour for an employer who employs personnel at the minimum wage, the minimum wage increase tends to cause a decrease in labour demand for this type of workers from employers. And when looking at the composition of the workforce working for the minimum wage, you realize that these are young people in large numbers who are still in school. The side effect can then be rather ambiguous, but unfavorable in both perspectives.

1. Making employment as a more attractive monetary option, the temptation is strong to drop out, leaving the road to a higher qualification, assuming of course the possibility to find a job;
2. By affecting the supply of work by employers, the minimum wage increase makes it more difficult to gain labour market experience to compensate low qualifications.

The net effect of these two opposite induced mechanisms will depend on a number of other contextual economic factors. When advocating a measure like raising the minimum wage to improve the situation of the “working poor”, the economist must assess the impact of this measure on other affected populations.

Public health and vaccines

Medical sciences is not restricted to the individual as a unit of care. While a physician’s medical thinking will restrict itself to the patient under treatment, public health (including epidemiology), just like economics, will use a population as a reference for assessing a situation and plan out an intervention. This latter reasoning and “treatment” ought to affect more than its targeted population.

A perfect example is a vaccination policy. Vaccines given at birth and all along our lifetime protect each one of us against measles, diphtheria, polio, meningitis and many other deadly communicable diseases. However, this is not the main reason of why vaccines make us safe. See, the effectiveness of a vaccine against a disease is unlikely ever 100% (it is usually around 90-95%). This means that a fair amount of people were not protected by the vaccine, despite being vaccinated. If effectiveness is 90%, then 10% of the people vaccinated are not receiving any protection from the vaccine. The main benefit of vaccines is their indirect effect (also called “herd immunity”): someone who benefits from the vaccine’s protection will not carry or transmit the disease to someone else, protected or not. Going back to Jean Tirole’s quote: a vaccine intervention on an individual or a population will likely affect other individuals and populations.

Banking on this indirect effect, early epidemiologists like Donald A. Henderson (Johns Hopkins University) led the successful eradication campaign against smallpox in less than 20 years. The last case of smallpox in the world was diagnosed in 1977, yet not everyone was ever vaccinated: it was simply impractical and too costly to reach out to every human with a smallpox vaccine. Instead, epidemiologists identified where smallpox cases where happening and targeted this specific population to eliminate smallpox in the community. With time, smallpox cases became rarer and rarer, until the disease was declared extinct. Vaccinating everyone who was vulnerable to the disease at the time (based on location of cases) benefits now to the entire human population.

This prowess was never equalled in public health. Despite their best efforts, researchers and policymakers struggle to fully comprehend the (potential) indirect effect of current vaccines. Since vaccines are an expensive technology to develop, produce and implement, Governments, insurances and individual people are wondering whether the direct (individual protection) and indirect (herd immunity) effects are worth the price. Moreover, all of them have competing interest… but we will let the economists discuss this later.

Hippocrates, the doctor – Xenophon, the economist

Non solum data – Data sine monito oculo nihil sunt.

---

Through this blog, we invite constructive comments and constructive article contributions – review our blog policy and have your say!