Tuesday, December 12, 2006

Baumol, inoculations and my flu

For the last several days I am under the influence – the flu.

As I ache and moan, almost on an hourly basis, I remind myself of the Baumol model that points out the optimal number of people that a welfare maximizing government should inoculate. As the number of inoculated people increases, the probability of being adversely affected by the flu decreases. At some point the costs and benefits are balanced at the margin.

Having listened to the public ads by the government that people should be inoculated I could only think that the government's calculations are mistaken. In short, I did not take the shot. Now I am paying for it.

If you did not know it, Baumol paints. Here is an example.

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