Economist proposes paying Americans $1,000 each to take coronavirus vaccine

Yahoo Finance’s Alexis Christoforous and Robert Litan, non-resident senior fellow at the Brookings Institution, discuss his proposal to pay Americans $1.000 to take the coronavirus vaccine.

Video Transcript

ALEXIS CHRISTOFOROUS: That really good news about the vaccine coming as daily virus cases and hospitalizations continue to hit records. More than 160,000 new cases were reported today in the US alone. But a vaccine, of course, is no good if people don't take it.

A recent Harris Poll found 58% of people said they would get vaccinated as soon as one was available. That is down from 69% in August. Our next guest says one way to get people to take a vaccine is to pay them. Please welcome economist Robert Litan, a Brookings Institution nonresident senior fellow.

We also want to welcome Yahoo Finance's Sibile Marcellus. Good afternoon to you both. So Robert, you say the government should pay people $1,000 to take the vaccine. Is that a small price to pay for herd immunity? Or is this the government overstepping?

ROBERT LITAN: Well, I actually proposed this idea back in August, at a time when the public opinion polls, as you said, were showing about 65% or so people were willing to take the vaccine and at a time when we didn't think the vaccine was going to be as effective as it may turn out to be.

At that time, Dr. Fauci was saying, maybe it will get to 75% effectiveness. I did a back-of-the-envelope calculation and showed that you don't get to true herd immunity with that level of effectiveness until about 80% take the vaccine.

And since the polls were showing around 65%, I just suggested one possibility as a plan B. And I really want to underscore this as a plan B, not as a first choice. But if you couldn't get up to the 80, then why not consider paying people?

Now since then, as you've said, we've had Moderna and Pfizer come up with 90% to 95% effectiveness if it turns out to be true. And so when you do the math, that reduces the required vaccination rate for the country as a whole to get to true herd immunity to somewhere in the 65% to 70% range. And as you just said, Harris is now saying 58% will be willing to take the vaccine. So that's not that far from 70, but we still have a ways to go.

We don't know what the side effects are going to be. We don't know that once the vaccine gets deployed, whether it's really going to be as effective as advertised. So I would still advocate having that idea in the closet or as a plan B, the idea of paying people take the vaccine. And yes, it would be worth it to get back to normal, get Main Street back to normal so we can go to sports events and basically get our lives back to normal. I think it'd be a small price to pay.

SIBILE MARCELLUS: I want to double down on the fact that you said that you still think that it's an option to pay people $1,000 each to take the coronavirus vaccine so we can get to that post-pandemic life as quickly as possible. Do you still think that amount is enough, $1,000 per person? Or would you advocate for possibly doubling that to $2,000 per person for taking the coronavirus vaccine?

ROBERT LITAN: Well, unfortunately, we have no good data and no good studies to know what price it will take to convert people who are otherwise reluctant to take the vaccine and, you know, have them go over that hump and then actually take the vaccine. So I just threw out the $1,000 on the theory that with a family of four, you're talking about $4,000 for families at a time when a lot of people need it.

And I thought-- that's my own judgment-- that that would be enough to convert a lot of people. And I have one additional wrinkle in the additional proposal which I would keep. And that is if you're going to pay people, pay them only, like, maybe $200 when they take the vaccine, hold out the other $800, and say that if the country reaches a national herd immunity target like 70% vaccination rate, then we'll pay you the other $800.

And by holding back that extra $800, it gives people who have taken the vaccine a very strong incentive to go on the-- on social media, tell their friends, tell their church members and so forth, take the vaccine because then we can all collect the money. And then society would get two benefits from the payment.

One is we'd get to herd immunity, true herd immunity without people dying unnecessarily. And two, we'd get an additional fiscal boost to the economy. So I think with that two-step feature, we have a greater chance of reaching true herd immunity if we actually need the payment.

SIBILE MARCELLUS: And speaking of the payment, so obviously there are anti-vaxxers out there, people who would refuse to take the vaccine. Do you think that giving them that incentive of $1,000 eventually-- you know, a little bit here, a little bit once they take the second shot, do you think that's going to get anti-vaxxers to take the vaccine?

ROBERT LITAN: Well, we don't know, really, what the true proportion of anti-vaxxers are of a total population, but I don't think it's as high as 30%. It may be 10% to 20%. So, really, what we're talking about is converting those people on the edge, people who are maybe distrustful of the FDA, people who just don't want to get the shot because it hurts, they're worried about the side effects, et cetera, or they just don't want to go to the trouble of going to the doctor or the hospital to get the shot.

It's those people, those people that may be 10% to 20% of the population-- if we can flip them and get them to take the shot, if we really need it, that's who I think the payment is for. I am not counting on the money converting a true anti-vaxxer.

ALEXIS CHRISTOFOROUS: You know, I know that this idea has been met with some criticism, but it's really not a new concept when you think about it. There are a lot of companies who waive or reduce health insurance premiums for employees who, say, participate in wellness programs. There have also been experiments with paying people to stop smoking or to lose weight. So do you think that that sort of goes along with that sort of line of thinking, Robert?

ROBERT LITAN: Yes, absolutely, and you gave some great examples. And I think it's better than the alternative. You know, the alternative, if we don't get to the 70%, let's say, target, the only alternative, if PSAs don't work, if the government urging doesn't work and the employer urging and all that stuff doesn't work, the only other alternative is mandates.

And people have talked about mandates, and I've looked further into this. I don't think the federal government has the legal authority to impose a national mandate, but states and localities probably do. The question is whether they would do it.

And if we look at the mask example, we have this checkerboard where we've got, you know, some states are willing to mask, you know, mandate a mask, and others are not. And you have people that are threatening governors and mayors for imposing masks.

So if you have all this opposition to masks, imagine what a mandatory vaccine requirement would do. And by the way, the government really can't force you to take the vaccine. What they-- the most they can do is say, we're not going to let you into public places unless you show a vaccine ID card, like into a restaurant or to a sports event and so forth.

But even that, a mandate like that, I think, in our very politically-divided citizenry, would cause a lot of angst, if not, you know, severe trouble. And so I think I'd rather induce people to take the vaccine with honey rather than vinegar and actually pay them to do it. That's just my personal preference. And I think politicians will be more-- would be more amenable to that than a mandate.

SIBILE MARCELLUS: In your estimate, if we were to pay certain people to get a vaccine, other people would just take it voluntarily, how quickly do you think the US economy would bounce back?

ROBERT LITAN: Well, this depends a lot on the supply constraints, on how rapidly you can get the vaccine out. As we know, people have talked about a four-stage process. So really, we're talking about people that are in their, you know, 20 to 60 age range.

They're not the highest-risk group. They're in the level 3 and level 4 category. And according to published reports, I don't think the vaccine will be available for those people until, you know, spring or early summer.

But if the vaccine is available then and you haven't gotten to the 70% or so that we need to get to true her immunity, I think we've got a couple of months after that, if you actually said we're going to pay people, you could get people vaccinated. But it all depends on, you know, how rapidly the places that administer the vaccine can deliver the shot. So we're talking maybe late summer, early fall, getting to what we call [INAUDIBLE] or normalcy again.

ALEXIS CHRISTOFOROUS: All right. Economist Robert Litan of the Brookings Institution and our own Marcellus, thank you.

ROBERT LITAN: Thank you.