Covid-19 Scars May Fade Faster Than We Think | Free to read


My local cheese maker, after reinventing itself as a general store, was opened during the lockout. The owner tells me something strange and something new has started to happen. Customers he hasn’t seen since March while diligently protecting themselves from human contact have finally resurfaced, blinking in the light of day. Besides, he says, they have no notion of physical distance. While the rest of us have been honing our skills for 15 weeks, these poor souls do not know how to behave in public.

But then, really one of us? We are all still working. Some people wonder without a mask, sneezing, snogging, shaking hands. Others are paranoid: “Stand two meters from me! Get out on the road! “I saw a masked gentleman scream as a puzzled woman ran towards him.

This reminds us that this pandemic is not limited to what governments ask us to do. Each of us has our own feelings about what is safe. These emotions shaped the arc of the pandemic. They will also define the path to recovery.

Consider the impact of the blockages. Common sense suggests that they were instrumental in reversing the disease, but they were not the only factor. Hand washing, handshake aversion and homework began long before the law was enforced.

A working paper by economists Austan Goolsbee and Chad Syverson attempts to separate the effect of mandatory measures from voluntary measures in the United States. For example, Illinois imposed restrictions before Wisconsin. Researchers looked at activity on either side of these borders, using cell phone data to track trips to stores and other businesses. They were able to understand the extent to which the arrest was actually voluntary.

The answer: a surprisingly high proportion. “Total pedestrian traffic has dropped by more than 60 percentage points,” they write. “Legal restrictions explain only about 7 percentage points of this. ”

A similar message comes from a comparison between Denmark, which had a firm lockdown, with Sweden, with its notoriously light approach. Overall spending fell 29% in Denmark and 25% in Sweden. This means that voluntary measures have caused much of the damage to the economy – and, it is hoped, have also brought much of the public health benefits.

I wouldn’t put too much weight on the specific numbers, but the basic message is important. People have not locked themselves in simply because governments have told them to do so. Now the reverse applies: just because shopping is legal again doesn’t mean people are rushing to the stores.

In Germany, they did it: the Germans spent more in May 2020 than in May 2019, suggesting that not only did they want to visit stores, they wanted to make up for lost time. It is encouraging, but only up to a point. Germany has had a good crisis by Western standards, with less than 10,000 additional deaths, up from 25,000 in France, nearly 50,000 in Italy and Spain and more than 65,000 in the United Kingdom. The United States currently represents an average of 100 times more new cases per day than Germany. Maybe the Germans feel safe because they are safe. Not everyone can say that.

Once the virus is removed, a quick recovery is possible. But could this experience leave a lasting mark on our thinking?

Perhaps. The economist Ulrike Malmendier has published several studies suggesting that our first economic experiences can form lasting attitudes. If the stock market is weak when we are young adults, we tend to hesitate to invest permanently. Likewise, the warmongering or complacency of the members of the Federal Open Market Committee is shaped by their personal experience of inflation.

A new working paper by Professor Malmendier and Leslie Sheng Shen suggests that recessions reshape consumer behavior long after they have disappeared. The aftermath is wonderfully described as “experience-induced frugality” – that is, people who have experienced periods of high unemployment save more and accumulate wealth, just in case. Such an economy could lead to more investment, of course, but another recent article by Julian Kozlowski, Laura Veldkamp and Venky Venkateswaran argues the opposite. They claim that psychological scars are destructive, as a keen appreciation of catastrophic scenarios will leave people fearful of making bold investments. Why risk anything in a capricious universe?

I wonder. We are of course learning from bitter experience. But we also have a great talent for forgetting. In particular, we forget how bad things are. The pandemic will be remembered for a long time, but the pain will lessen. After Hurricane Katrina, demand in the US national flood insurance program increased. Three years later, demand for flood insurance returned to pre-Katrina levels.

I guess smart statisticians will be able to detect psychological responses to the pandemic for decades to come – but that, for a casual look, everyday life in 2022 will look a lot like that of 2018. Scars don’t always heal, but they fade.

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