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Fighting Malaria: selling v. giving

Thomson Reuters Foundation - Mon, 25 Apr 2011 11:55 GMT
Author: Dean Karlan
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Dean Karlan is a professor of economics at Yale University, president and founder of Innovations for Poverty Action, and co-author with Jacob Appel of More Than Good Intentions: How a New Economics Is Helping to Solve Global Poverty. The opinions expressed are his own.

Each year more than a million lives are lost to malaria.

This loss is all the more tragic because there is such a cheap and simple way to fight transmission: insecticide-treated bed nets. 

There are strong reasons to give these nets out for free because they have positive spillover effects - even those not sleeping under one benefit because the chain of transmission is broken. Some economists worry that giving bed nets out for free will only lead to waste, as I explain in my new book with Jacob Appel "More Than Good Intentions: How a New Economics is Helping to Solve Global Poverty".

However research by Jessica Cohen of the Brookings Institute and Harvard School of Public Health and Pascaline Dupas of University of California, Los Angeles, and co-founder of Kenya-based NGO TAMTAM (Together Against Malaria), found no difference in usage between people who buy their own nets and those who receive them for free. They also found that even very small price increases massively reduces usage.  

For example, TAMTAM and many other NGOs focused on distribution of bed nets to prevent malaria say that malaria is also a major obstacle to economic prosperity – annual economic loss in Africa due to malaria is estimated to be 12 billion dollars, representing a 1.3 percent annual loss in GDP growth in endemic countries.

Public health experts and officials have long agreed that prevention through wide-scale use of long-lasting insecticide treated bed nets (LLITNs) is the most viable way to prevent and control malaria. Bed nets work by creating a protective barrier against mosquitoes at night, when the vast majority of transmissions occur, and can last for up to four years. 

Studies show that the use of bed nets can reduce transmission by 50 percent or more and reduce child mortality by up to 20 percent. Through TAMTAM, one bed net costs just 7 dollars to buy and deliver to individuals in need.

So what’s the best way to fight?

Here is an excerpt from my book, More Than Good Intentions, with Jacob Appel where we discuss this issue of selling bednets versus giving them away for free (not we have updated the text to reflect a shift in policy by Population Services International towards giving away free bednets):

The first step is to keep the enemy at bay. During waking hours, a wave (or slap) of the hand is usually sufficient defense, but at night—which happen to be peak biting hours for the Anopheles mosquito—people need help. The most effective preventative measure thus far has been the bed net, a simple fabric screen, impregnated with insecticide, which hangs over a bed and tucks under the mattress.

Beyond protecting those who sleep under them, bed nets also confer indirect benefits on the broader community by breaking the chain of transmission. As more people are directly protected, fewer opportunities exist for mosquitoes to become carriers, and consequently the risk of infection decreases for everybody. 

You could argue for providing free bed nets to the poor on a purely humanitarian basis; but these cascading social benefits make the case even stronger. A number of influential economists, most notably Jeffrey Sachs, have recommended just that. Their arguments have found traction in the aid community, which has distributed millions of free nets in the developing world over the past decade.

But others contend that it’s not as simple as setting up a card table in an impoverished community and doling out nets to all the passersby. Getting them into the hands (and bedrooms) of the poor is, after all, only the first step. To be effective, the nets must be used properly; and this is where some economists see a problem. They maintain that blind giving is wasteful. It ignores the preferences of those we intend to help. Think, for instance, of the coupons slid indiscriminately under windshield wiper blades in the parking lot of the grocery store. 

How many of them end up littering the ground? For whatever reason, some people might have no interest in sleeping under an insecticide-soaked screen; surely any bed nets that fall into their hands will only collect dust. In his book White Man’s Burden, William Easterly, New York University economist and former senior adviser at the World Bank, reports, “a study of a program to hand out free nets in Zambia to people, whether they wanted them or not . . . found that 70 percent of the recipients didn’t use the nets.”

Easterly’s camp addresses the issue of waste by selling nets for a nominal price instead of giving them away. Requiring people to pay, they argue, achieves two goals. First, it filters out those who don’t want, or don’t need, the product; second, it creates a sense of investment for those who choose to purchase. Having sunk hard-earned cash into the nets, buyers should want to get their money’s worth.

Ever buy tickets to a show, and then when the night comes you don’t really want to go—but you still feel obligated? Behavioural economists call that the “sunk cost effect.” It is the phenomenon that makes you feel like you should go to the event, just because you paid for it, or that you should finish that lobster dinner you ordered, even if you’re already full.

Now, an economist would stop eating his lobster: He knows he’s already bought the meal, and that he’s going to pay for the whole thing, no matter how of it much he eats. So he’ll just eat the amount that makes him happiest. We Humans don’t always think that way. We force ourselves to get out of the house and go to the show. We try to finish our lobster dinners.

The idea of Easterly’s camp is to keep protection within reach for everyone—hence the big discounts—while using insights from behavioural economics to ensure that the nets go to people who will use them. Among practitioners, the market-based approach also has its adherents. Population Services International, a leading international health NGO that sells discounted nets in dozens of countries (and gives them away for free as well, a welcome change in their policy in the past few years), claims that its programs prevented nineteen million episodes of malaria worldwide in 2007 alone.

What can we make of these conflicting stories, each with its cadre of supporters and its battery of compelling statistics? Amid the assertions and invective, there are a few pieces of hard evidence to guide our thinking. One comes from Cohen and Dupas, who worked together to learn how the method of distributing bed nets impacts the way they are used. 

They snatched the debate between free and cost-sharing out of the realm of abstraction and put it down on the dusty ground in western Kenya. In their project, pregnant women who had come to public health clinics for prenatal care were offered bed nets at randomly assigned prices. Some women were offered nets for free, and others for a nominal price between fifteen and sixty cents apiece.

What they found was simple supply and demand, the bread and butter of classical economics, at work: Fewer people bought nets when they were more expensive. While this discovery lacked the power of revelation, the intensity of the women’s responses to price was remarkable. Cohen and Dupas calculated that increasing the price from zero to 75 cents would drive off three-quarters of customers!  75 cents was the going rate for a discounted net from Population Services International at the time of the Cohen and Dupas study.  Population Services International has since changed to giving them away for free in Kenya, a great example of research influencing actual policy and improving lives for the better!

The drop-off in demand might have been acceptable, maybe even desirable, if the people being filtered out were less likely to use, or to need, the nets. But it was not so. When the nets were distributed, clinic workers measured each recipient’s hemoglobin level, a strong indicator of malaria, and found that those who paid more were no more likely to be sick than those who paid less or nothing. So the invisible hand of the free market was not doling out protection to those who needed it most. Higher prices also failed to screen out people who wouldn’t use the nets effectively. 

Biologically, malaria is the same everywhere—the same five protozoan parasites, carried from person to person by the female Anopheles mosquito. A mosquito becomes a carrier when she bites an infected person. Then she has to stay alive for two weeks (which is hardly a given; most Anopheles mosquitos’ entire lives last about two weeks) while the parasite gestates in her abdomen. Only then can she pass it to other humans, which she does when she bites them to feed.

Surveyors visited the homes of recipients a few weeks after the nets had been distributed to see whether they had been installed properly and to ask how they were being used. If, like those in Easterly’s camp, they were expecting to find most of the free nets still in their wrappers, they would have been disappointed. Roughly the same portion of nets—just over half—were found hanging in all the homes, regardless of the price that had been paid.
Since prices didn’t change the kinds of people who got nets or the way they were used, the difference between cost-sharing and free distribution could be easily summarized: A lot fewer people ended up protected, and the providers of the nets saved some money.

Unfortunately, they weren’t saving much. Each net cost about six dollars to produce, so when Population Services International sold nets to Kenyans for seventy-five cents, according to their prevailing policy, they were already bearing the vast majority of the cost. Covering the last seventy-five cents would have increased their cost per net by about 13 percent, but then they could have served four times as many people! So it is with great pleasure that Population Services International gives them away for free in Kenya; this needs to be the policy worldwide.

In fact, given the indirect social benefits of protection (i.e., breaking the chain of transmission), spending a little bit more to boost demand for the nets probably made economic sense too. Cohen and Dupas crunched the numbers from the providers’ perspective and determined that, on average, it was likely cheaper to save a life by giving the nets away than by selling them.

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