Economic effects of HIV/AIDS

Time for a lesson from the other subject I teach, economics.  To begin, every country has what is known as a production possibilities curve.  A production possibilities curve (PPC) is a graphical representation of different rates of production of two goods and services (in this case, capital and consumer goods) that an economy can produce efficiently at a given time period, at a given level of technology and with finite factors of production (land, labor, capital and enterprise). Let's look at one.

In this PPC, point A represents a corresponding level of capital goods and consumer goods, whereas point E is currently unattainable given this country's current state of technology and store of factors of production.  If the output increases to point B, there has been actual growth, and any point on the curve (C or D) would indicate the country is producing at its maximum level using all land, labor, capital and enterprise contained therein.  A shift out in the PPC illustrates economic growth, or the increase in the value of the goods and services produced in an economy over a given time period. This suggests an increase in the potential growth of the economy, and occurs when there is an increase in the quality and/or quantity of a country's factors of production.

How do factors of production relate to the HIV/AIDS epidemic?   This disease kills the most productive workers in society, people from the ages of 15 to 49.  This essentially obliterates labor as a factor of production through sheer reduction in numbers and diversion of attention of the uninfected away from work and towards child/elder (= dependent) care.  Moreover, human capital, which is the education and training that makes people more productive workers, is also obviously repressed by countries with high HIV/AIDS adult infection rates.  It's difficult to invest in workers' futures when they either have or are at significant risk of catching the disease.  We could show these affects on the graph above by shifting the PPC inwards (a rare event) like we would with a major natural disaster (i.e. Haiti 2010) or war (Rwanda, 1994).  Please watch Professor Emily Oster's economic explaining in the post above...it's great!

HIV and UNDP - Economic Effects of HIV (scholarly article)