Positive externality Immunizations impose what is known as a positive consumer
externality on society. In addition to providing the individual with protection against certain antigens it adds greater protection to all other individuals in society through
herd immunity. Because this extra protection is not accounted for in the market transactions for immunizations we see an undervaluing of the marginal benefit of each immunization. This
market failure is caused by individuals making decisions based on their private marginal benefit instead of the social marginal benefit. Society's undervaluing of immunizations means that through normal market transactions we end up at a quantity that is lower than what is socially optimal. For example, if individual A values their own immunity to an antigen at $100 but the immunization costs $150, individual A will decide against receiving immunization. However, if the added benefit of herd immunity means person B values person A's immunity at $70 then the total social marginal benefit of their immunization is $170. Individual A's private marginal benefit being lower than the social marginal benefit leads to an under-consumption of immunizations.
Socially optimal outcome Having private marginal benefits lower than social marginal benefits will always lead to an under-consumption of any good. The size of the disparity is determined by the value that society places on each different immunization. Many times, immunizations do not reach a socially optimum quantity high enough to eradicate the antigen. Instead, they reach a social quantity that allows for an optimal amount of sick individuals. Most of the commonly immunized diseases in the United States still see a small presence with occasional larger outbreaks.
Measles is a good example of a disease whose social optimum leaves enough room for outbreaks in the United States that often lead to the deaths of a handful of individuals. There are also examples of illnesses so dangerous that the social optimum ended with the eradication of the virus, such as
smallpox. In these cases, the social marginal benefit is so large that society is willing to pay the cost to reach a level of immunization that makes the spread and survival of the disease impossible. Despite the severity of certain illnesses, the cost of immunization versus the social marginal benefit means that total eradication is not always the end goal of immunization. Though it is hard to tell exactly where the socially optimal outcome is, we know that it is not the eradication of all disease for which an immunization exists.
Internalizing the externality In order to internalize the positive externality imposed by immunizations payments equal to the marginal benefit must be made. In countries like the United States these payment usually come in the form of subsidies from the government. Before 1962 immunization programs in the United States were run on the local and state level of governments. The inconsistency in subsidies lead to some regions of the United States reaching the socially optimal quantity while other regions were left without subsidies and remained at the private marginal benefit level of immunizations. Since 1962 and the
Vaccination Assistance Act, the United States as a whole has been moving towards the socially optimal outcome on a larger scale. Despite government subsidies it is difficult to tell when social optimum has been achieved. In addition to hardships determining the true social marginal benefit of immunizations we see cultural movements shifting private marginal benefit curves.
Vaccine controversies have changed the way some private citizens view the marginal benefit of being immunized. If Individual A believes that there is a large health risk, possibly larger than the antigen itself, associated with immunization they will not be willing to pay for or receive immunization. With fewer willing participants and a widening marginal benefit reaching a social optimum becomes more difficult for governments to achieve through subsidies. Outside of government intervention through subsidies, non profit organizations can also move a society towards the socially optimal outcome by providing free immunizations to developing regions. Without the ability to afford the immunizations to begin with, developing societies will not be able to reach a quantity determined by private marginal benefits. By running immunization programs organizations are able to move privately under-immunized communities towards the social optimum. ==Race, ethnicity and immunization==