Pandemic Microeconomics Revisited: The Incentive Effects of Liability Shields for Contagion Risk

As a Miami Heat fan who lives in Los Angeles right now, I marvel at the success of the NBA Bubble.  I am a fan of Jimmy Butler’s grit.   The league has created a “safe space” featuring no infection for months.  The private sector (the NBA) achieved this.  Yes, the bubble is an island and yes plenty of $ has been spent to contain contagion risk but in this blog post, I would like to point out some relevant lessons.

In early March 2020, I started to sketch out an economics of liability study where I wanted to partner with a lawyer to explore the way liability law could be used to nudge firms who employ essential workers to raise their efforts in protecting their workers and their stores and physical places. 

Consider the following “report cards” strategy.  Suppose that every non-household entity such as Nursing Homes, restaurants, supermarkets, barbershops, had to post a record ever two weeks of their structure’s two week % of COVID cases.  Ideally, this would indicate the % of recent COVID diagnosis among workers and people who visited the place.

Such percentages would be reported on a public website and data scientists could access the data.  Public health authorities could then rank these entities and people armed with this information could vote with their wallet and boycott and substitute away from risky places.

The fear of liability lawsuits for places who did not lower their COVID infections rates would nudge forward self protection investment.  Such places would better screen their workers.

While many economists have written COVID papers, I know of no papers trying to harness competition and “cleanliness” to reduce contagion risk.  The NBA bubble shows that it can be done. What is the marginal cost of reducing risk?  Are there any strategies that are cheaper than what the NBA did but achieve part of these gains?