Economics and International Law of Flu Pandemics--

David Brooks praises what he calls the "decentralized approach" to the swine flu crisis, arguing that it is better for nations to respond to the flu on their own, albeit with the loose coordination made possible by informal scientific and medical networks, than for some monster world agency to impose a centralized solution to the problem. The World Health Organization is far from being such an agency—fortunately, in Brooks' mind. Brooks writes as though we could have a centralized agency if we wanted but that we have wisely opted for a more decentralized approach. In fact, it is doubtful that we could have such an agency but if we could it would be better if we did. Our current system is very much a second best, and it's wrong to treat this failure of international cooperation as though it resulted from wise, conservative self-restraint on the part of nation states rather than the limits of the state system.

One might start by asking why international law might be needed in the first place. No state benefits from a flu outbreak and so it might seem that states' interests converge and they would take adequate prevention, detection, and containment measures without any pressure from international law. However, this view, which seems to Brooks', turns out not to be true. A state does not fully internalize the costs of a flu outbreak. If the outbreak is severe enough, individuals may carry the infection across borders and cause outbreaks in other countries. This suggests that states will take inadequate precautions from the standpoint of global welfare.

In particular, states can do three things to minimize the risks of a pandemic. First, they can invest in prevention measures, including building health clinics in remote rural areas (where outbreaks often occur because of the degree of contact between humans and animals), inoculating people when suitable vaccines are available, and, in other ways, promoting health, nutrition, and sanitation. Second, states can invest in detection and control measures: training doctors and nurses to recognize the symptoms of the flu, to test for it, and to send information to national health authorities, who can then implement an appropriate response, including vaccination and quarantine. Third, states can disclose the outbreak to the rest of the world, which enables other countries to protect their citizens—such as by cutting transportation links and (where relevant, not here) imports of contaminated food.

Clearly, states—and we are mainly talking about developing states here, because in those states human-animal mingling is most prevalent—have inadequate incentives. As much as they may wish to avoid epidemics, they have other uses for funds as well, and will be unlikely to take account of the benefits to other countries from strong prevention, detection, and control measures at home. But the main problem is disclosure to the rest of the world. Developing nations suffer greatly if other countries restrict migration and exports. They are thus tempted to delay disclosing epidemics in the hope that they can be controlled locally. This is what happened with China and SARS in 2003, and it appears that Mexico may have repeated this pattern though it is not yet clear. Given the speed with which a person, and hence the disease, can travel around the world on a jet airplane, short delays in disclosure of an outbreak can have devastating consequences. Indeed, other countries may overreact to information about disease outbreaks and cut links prematurely.

What can be done? Let us start with the optimal response. In an ideal world, states would enter a treaty in which they agreed to take the globally optimal prevention, detection, control, and disclosure measures. Because the developing world would incur most of the costs (because they are the main sources of influenza), and the developed world most of the benefits, such a treaty would probably involve a substantial side payment from the rich to the poor. In particular, countries like China and Mexico would commit to investing greater resources in prevention, detection, and control; and they would also commit to alert other countries the moment that an outbreak is detected. Other provisions would require the pooling of medical expertise, the stockpiling of vaccines and a system of distribution, and perhaps a central agency that would coordinate the global response. Indeed, an optimal (but unimaginable) regime would authorize the agency to order countries to shut their borders and take other measures as necessary, with severe penalties to be imposed on states that fail to obey those orders.

The current international legal regime emphatically falls short of this ideal. WHO has virtually no power to compel a state to do anything. It can collect information—if states cooperate—and it can make recommendations that governments are free to ignore. Nonetheless, WHO seems to be highly respected and the system works well within its limits. How can this be so when there is no international law that compels states to give information to WHO or follow its advice?

The answer is that WHO can offer states something they want—expertise and assistance. A developing nation faces a tradeoff when it decides whether to disclose an outbreak. It gains assistance from WHO, which helps it protect its own citizens, but it risks being isolated by other states. The tradeoff need not cause the state to take the optimal action, but at least the state has stronger incentives to disclose the outbreak than it would if the carrot of assistance were not offered. In effect, the developed world—which supplies most of WHO's funds—is buying disclosure. To the extent that the incentives to disclose at an early stage of the outbreak are still too weak, the developed world should seriously consider compensating the state that discloses responsibly for some or all of the costs of international isolation until the outbreak is controlled.

The problem is that the prospect of this assistance might cause developing nations to underinvest in prevention, detection, and control in the first place. WHO already does provide pre-outbreak assistance to states—its overall mission, even aside from the component of it that addresses risks of pandemic, is to improve health care in poor countries. This is one of the many ways that poor countries can benefit from being poor (having bad intellectual property laws is another) and it makes sense for them to underinvest in health, or to threaten to do so, in order to obtain greater assistance from rich states. Still, the high cost of a local outbreak limits these perverse incentives to some degree.

WHO serves another important function. It has established best practice guidelines for dealing with a disease outbreak and it issues alerts that notify governments of the severity of the outbreak and hence what steps to take. The alerts range from phase 1 ("no viruses circulating among animals have been reported to cause infections in humans") to phase 6 ("the pandemic phase, is characterized by community level outbreaks in at least one other country in a different WHO region in addition to the criteria defined in Phase 5"). We are currently at phase 5 ("human-to-human spread of the virus into at least two countries in one WHO region. While most countries will not be affected at this stage, the declaration of Phase 5 is a strong signal that a pandemic is imminent and that the time to finalize the organization, communication, and implementation of the planned mitigation measures is short"). Governments greatly benefit from this information and those governments with low levels of public health expertise can follow the WHO's best practices guidelines, which benefit them as well as people in other countries.

WHO's weak information disclosure and advisory functions have an important effect on the behavior of states because poor states enjoy private benefits from this information, and rich states are willing to finance and operate WHO because those rich states gain from the actions of the poor states. It also helps that a scientific consensus exists in broad lines about the appropriate response to a disease outbreak. This is a happy story of the success of international organizations but it also illustrates the limits of international law. An optimal system—the system that would exist if states could fully resolve collective action problems and overcome their conflicting interests—would be far more intrusive. It would have stringent laws and feature an agency that resembles domestic authorities that have draconian powers to quarantine and otherwise interfere with people's freedoms when a disease outbreak strikes. And in international regimes where science does not provide an objective grounding for states' interests, even the minimalist type of international cooperation illustrated by WHO won't be possible.

More from Ken Anderson and David Fidler on swine flu and international law.