Afraid or annoyed?

Posted by: Paul Donovan

06 Mar 2020
  • The economic impact of the coronavirus is felt through fear. Fear changes consumer behavior (changing demand patterns). Fear changes companies' behavior (travel bans). Fear changes policy makers' behavior (the US Fed seems afraid). The impossible question for economists is "how far does fear go?".
  • Being annoyed may put a limit on consumers' fears. We have parallels with food health scares in the past. If people feel policy is going too far, their emotions change. Fear of the virus is replaced with annoyance at policies. Italian reactions to the quarantine measure are one example. Opinion polls suggest an increase in the number of people who think policy is overreacting to the virus. With some governments closing schools, annoyance is likely to rise. Having to provide or arrange childcare at short notice can be irritating.
  • A balance of fear and annoyance could be helpful. Fear should help to control the virus. Fear keeps people washing their hands. Annoyance should keep people rational. If people feel that the policies of their government or their employer are "going too far", they are less likely to panic.
  • Economists now have to find ways of monitoring two emotions to assess the risks to the global economy.

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