Pandemic’s impact on economic behavior

Richard Curtin - FACULTY COMMENTARY By Richard Curtin , director of the University of Michigan Surveys of Consumers Will the pandemic cause a permanent shift in the behavior of consumers? A common assumption is that the benefits of social distancing will make people less likely to risk being in crowds in the future, and the financial hardships endured will make people more likely to increase their emergency savings. This is the rational response when consumers are faced with significantly higher risks to their health and finances. Similarly, these risks are assumed to revert to the lower prior levels after a vaccine is made available and finances restored. Once the elevated risk disappears, economic theory holds that consumers' preexisting preferences would again determine their decisions, with their economic behavior comparable to the past. What is missing in the usual analysis of people's choices is how emotions also shape behavior. Passion has always been seen as the enemy of reason. Most believe that inserting passions into decisions would guarantee poor judgments.