EconExtra is a series of posts that go beyond the textbook, relating current events and recent developments in economics to content standards, and providing resource suggestions to help you incorporate the current events into your lessons.

The Headlines

From Vax-a-Million to Vax and Scratch to Take Your Shot, vaccine-based lotteries and other incentive programs are popping up across the country. Ohio came up with its Vax-a-Million lottery in mid-May to bring up the vaccine numbers. It was the first, with its first winners drawn this week.  And it seems to be working:

Since Ohio started the Vax-a-Million lottery earlier this month, the number of residents ages 16 or older who have received at least one dose of the vaccination jumped by 33 percent, The Associated Press reported. The surge in vaccination rates, 55 percent, is even higher for those between the ages of 20 and 49, Slavitt said. (NBC)

New York and Maryland followed a week later, and at this point, a total of at least six states have decided that offering a lottery to vaccinated residents is a great way to get the vaccination numbers up. California’s program is the biggest. The federal government is offering guidance to states on how to use funds from the American Rescue Plan for these to support these efforts. And states and businesses are offering other types of vaccine incentives. (NewsNation) (CNN)

I was chatting with a neighbor the other night, and his comment on the lottery was “I’d like to see the economics behind that decision.” And that was the genesis of this post!  His question got me thinking. How would you go about measuring and analyzing the economic benefits of the lottery? How would you compare them to the benefits of other activities, like setting up mobile or mass vaccination sites, expanding testing, or helping hospitals and businesses recover or make Covid-related updates?

At the center of the economic analysis would be assessing the benefit of keeping any individual healthy. In other words, what costs are avoided if people stay healthy?

Ohio Governor DeWine, in his op-ed piece that appeared in the New York Times on Wednesday, did not mention consulting with economists before deciding to go forward with the lottery. It was all about getting the vaccination rates to turn back around, knowing that unless that happened, it would be hard to get anything, including the economy, back to normal. However, in that piece, reference was made to some figures that could help us model the economic impact (more on that below.)

However, behavioral economists HAVE been doing research on vaccine incentives, and lotteries prove to be very effective. It is worth listening to or reading this NPR interview with Katie Milkman, a behavioral economist from the Wharton school. ABC covered the psychology of lotteries as well, and why they work.

Possible Activities

Begin by reading the articles on the various incentive programs and listening to/reading the NPR interview and ABC article on the behavioral aspects.

Discuss the behavioral aspects of the lottery, and how they compare to other incentive schemes. Are lotteries more or less effective than distributing a smaller incentive to everyone? What could make them more effective?

Brainstorm ways to model the economic value of a lottery. The way to do this would be to quantify the savings or costs avoided by not getting sick. For example, the work cited in the DeWine column suggested that the $5.6 million cost of the lottery is equivalent to the cost of caring for 40 critically ill Covid patients. So if the bump in vaccinations prevents 40 people from getting critically ill, the societal cost will be even.

But not everyone gets critically ill. How do we quantify the costs avoided for those who get ill, but not critically?

• For students, avoiding lost time in school and potentially having to retake (pay twice) for classes.

• For people working outside the home, avoiding the lost wages.

• For caregivers in the home, avoiding the costs of hiring help to replace them.

• For all, the medical costs of treating Covid.

In terms of extent of costs, you would have to look at some distribution of the severity of the disease, including probability of death and the lifetime earnings lost in that case.

How many cases of Covid averted by the vaccine would it take to be equal to, say, $1,000,000? Then do the rest of the math to measure the success.

The modeling effort may take too much research and time to complete, but thinking through WHAT data you would need and HOW you would make the calculations would be a useful exercise and window into how empirical economic analysis works. At the very least, in years to come, we should be able to look back and better measure the success of these lotteries.

About the Author

Beth Tallman

Beth Tallman entered the working world armed with an MBA in finance and thoroughly enjoyed her first career working in manufacturing and telecommunications, including a stint overseas. She took advantage of an involuntary separation to try teaching high school math, something she had always dreamed of doing. When fate stepped in once again, Beth jumped on the opportunity to combine her passion for numbers, money, and education to develop curriculum and teach personal finance at Oberlin College. Beth now spends her time writing on personal finance and financial education, conducts student workshops, and develops finance curricula and educational content. She is also the Treasurer of Ohio Jump$tart Coalition for Personal Financial Literacy.