SECOND ORDER EFFECTS (COVID-19)
It’s more likely that we’ll see some increase in housing prices in suburbs as those areas become more desirable.
As the global pandemic rages, behavioural scientists around the world are engaged in their best thinking to design nudges, boosts and outright mandates that encourage people to practice social distancing, stay home and practice sensible hygiene—particularly washing hands. Likewise, governments around the world are taking increasingly stronger measures to ensure compliance with measures that will keep people safe, flatten the curve and reduce the mortality rates associated with the pandemic.
Yet, even as we deal with the emerging issues of ensuring compliance to flatten the curve, we should also consider and prepare for the potential consequences and second order effects both of the pandemic itself and of our actions in creating a ‘new normal’. Right now, we need mass compliance to save lives, but what happens after the pandemic?
I think there may be a few second and third order effects across a few domains. (Note I don’t offer any hypotheses on the impact of pandemic on the economy. Check out Ray Dalio’s work and Joe Davis at Vanguard for insights.) On one hand, there may be a return to normal—the way things were before the pandemic, mass crowding, a fuzzy sense of the lines around government reach and individual rights in democracies, a preference for urban environments because of their correlation with higher economic opportunity, and so on. On the other, it is likely we’ll see some impact to what becomes normal in terms of:
1. Government expectations and reach
In the 4½ weeks since Italy detected the first signs of the outbreak, the country has lost more than 8,000 people to the virus. The Italian government locked down the country within days. In Australia, after residents flouted social distancing rules, the government instituted a strong ban on public gatherings. In many ways the pandemic is a global emergency similar to warlike crisis. But in thinking about life after the pandemic, questions arise: will governments express a preference for this kind of swift paternalistic hold on citizens which, while valid and much needed now, could be called upon again in the future when there may be an inkling or cause for concern, giving the excuse of moving quickly to avoid a covid-like situation before evidence support such moves? Do democracies, particularly, have enough checks and balances at all government levels to ensure government reach returns to normal post-pandemic?
2. Work preferences and employee expectations of employers
As citizens and employees, we’re learning and redefining what it means to be an essential employee—we’re starting to see how grocery store attendants, delivery persons and others play vital roles in the economy similar to healthcare professionals. At the same time, we’re observing the efficiency benefits as well as the challenges of working from home. Finally, we’re becoming privy to the economic instability inherent in many of the services we’ve taken for granted—coffee shops, restaurants, barbers, cleaners, and so on. We’re constantly being told to be financially prepared for emergencies, but coming out of this emergency, we’ll learn to ask questions of our employers (and landlords) about their economic stability and how prepared they are for emergencies. Because their actions directly influence our lives.
3. Hygiene and personal space
It is likely coming out of this pandemic, we’ll institute social norms around distancing—this may have 3rd order effects on transportation. Will we see an increase in what’s considered personal space, and a reluctance to overcrowd public transportation even during peak hours?
We certainly will (or should) see an increase in basic hand washing. The provision of water to rural communities has been top of mind for UNICEF’s water, sanitation and hygiene (WASH) team which works in over 100 countries worldwide to improve water and sanitation services, as well as basic hygiene practices. Last year, UNICEF’s efforts provided nearly 14 million people with clean water and over 11 million with basic toilets. Does clean and sanitary water become even more of a priority for governments? And more importantly, will we see consistent and rigorous hand-washing become the norm?
4. Urban dispersal and movement preferences
While recent years have seen a mass exodus out of big cities such as New York, international migration often stabilises that outflow. As people consider where they want to live moving forward, we may see a tendency towards rural more spread out areas, and for those who still need to enjoy the economic and social advantages of living in a big city—a preference for neighbourhoods in suburbs closer to cities. There’s a remote chance that this may lead to a levelling of housing prices across big cities over the next few years, but it’s more likely that we’ll see some increase in housing prices in suburbs as those areas become more desirable.
5. Global migration
As the pandemic rages, at least 27 countries on every continent have closed their borders to certain foreign nationals. While all of these countries will at some point re-open their borders, many will maintain restrictions against certain nationals. I don’t expect there will be a correlation between incidence of disease and these restrictions. Weak passports could become weaker.
6. Consumption patterns
As stated above, we’ve all heard and been told to save for a ‘rainy’ day or an ‘emergency bucket.’ Workers who now have unsteady sources of income are experiencing firsthand the need for those buckets. But workers who are guaranteed income stability or are in a financially healthy position not only need to consider their consumption but also will start to see their larger role in keeping the economy going—in ensuring the small businesses around them thrive. Our perception of our role as consumers will likely start to be expanded to include our responsibility for the small businesses around us. We’ll hopefully see savings rates increase after the pandemic, yet this may be counterbalanced with our sudden understanding of how our local economy operates.
The above are my wild hypotheses. I’m reading more on the 1918 Pandemic and the aftereffects of the Great Depression to understand how people emerge from abnormal times, and what it does to decision-making at a micro-level. If you’ve got any resources, please share them with me: email@example.com. I’m also interested in the hypotheses of other behavioural scientists, economists and everyone else out there. Of course, stay safe (indoors), wash your hands often and rigorously, and check in (digitally) on the people around you.