Econ Vs. Finance

MedPundit points to a Forbes article extolling the cost-savings of varicella (chicken pox) vaccines:

The chickenpox vaccine is dramatically reducing the need for medical care for the disease, and it's saving millions of health-care dollars, too.

Those are the conclusions of a new study in the Aug. 17 issue of the Journal of the American Medical Association, which found direct medical expenses for people with chickenpox dropped to $49.1 million in 2002, down from an average of $201.8 million in 1994, a year before the vaccine was available.

"Hospitalizations decreased 88 percent, and medical visits by almost 60 percent. Medical expenditures decreased by about 75 percent," said study co-author Dr. Abigail Shefer, a medical epidemiologist at the National Immunization Program run by the U.S. Centers for Disease Control and Prevention.

MedPundit rightly points out you can't just look at this one benefit:

But, that's not what the study says. Hospitalizations for chickenpox declined from 2.3 per 100,000 to 0.3 per 100,000. That could be described as dramatic, although we're talking about small numbers to begin with. In 1994/1995, before the vaccine was widely adopted, chickenpox-related hospitalizations and doctor visits cost $84.9 million. In 2002, after the vaccine was adopted, the cost was $22.1 million, a savings of $62.8 million a year. So, how much does it cost a year to give the vaccine? The researchers estimate $144 million.

But then she makes a curious statement:

From a strictly economic perspective, it would appear to be a loser.

It's common for many to misstate what is and isn't economics, but I wonder how one could conclude that this is an economic loser. If you're commited to doing a cost-benefit analysis, one has to include all the costs and all the benefits. How curious that she decided in her "strictly economic analysis" to ignore the biggest benefit of all: people no longer will get chicken pox!

I'm sure she likely meant to say "strictly financial perspective" [and implying that the perspective we were looking at is that of the payors (ie. insurers) who do not see the absense of morbidity as a benefit]. If she had said that, it would be fair and uncontroversial. But economics is not finance, lay use of the term notwithstanding, and continuing to conflate the terms perpetuates misunderstanding of economic concepts. Economics is the study of choice and value, which may or may not be measures by money.

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I don't think finance and

I don't think finance and economics are all that different (at least from a macro perspective). Economics may be the study of choice and value, but finance is the study of how to value and make choices.

Now, had you said "Economics vs. Accounting" I would have agreed with you.

You know what she meant.

You know what she meant.

Looks like, in your concern

Looks like, in your concern over the semantics, you excised an important input for the cost-benefit analysis - the cost of administering the vaccine, estimated at $144 million per year. Without that, the post is incomprehensible (though the point made is quite correct, we have to put a value on the less tangible benefit of people not getting chickenpox. As someone who got it as an adult, I'd value it quite highly!)

Ah, geez. Pretty

Ah, geez. Pretty significant excision, ya think? Corrected. Thanks brianr.