Optimal Social Distancing and the Economics of Uncertain Vaccine Arrival

Beliefs about the arrival time of a vaccine have a large effect on optimal social distancing in an SIR model, though the relationship is complex. A higher mean vaccine arrival time can increase or decrease optimal distancing depending on assumptions. We analytically demonstrate two channels that explain the ambiguity. We use a quantitative model that allows for targeted policy across risk groups to evaluate recent proposals for COVID-19 to let the young go and protect the old. If the mean vaccine arrival time is two years, the proposal might be loosely justified, but it is catastrophic if mean arrival is six months—520, 000 more old die, 380, 000 more young die, and regret exceeds US$3 trillion. The welfare gains from the targeted policy are also highly sensitive to vaccine arrival beliefs.