Saturday , July 4 2020
Home / T. Cowen: Marginal Revolution / The Long-Term Belief-Scarring Effects of COVID-19

The Long-Term Belief-Scarring Effects of COVID-19

Summary:
The largest economic cost of the COVID-19 pandemic could arise from changes in behavior long after the immediate health crisis is resolved. A potential source of such a long-lived change is scarring of beliefs, a persistent change in the perceived probability of an extreme, negative shock in the future. We show how to quantify the extent of such belief changes and determine their impact on future economic outcomes. We find that the long-run costs for the U.S. economy from this channel is many times higher than the estimates of the short-run losses in output. This suggests that, even if a vaccine cures everyone in a year, the Covid-19 crisis will leave its mark on the US economy for many years to come. That is from a new NBER working paper by Julian Kozlowski, Laura Veldkamp, and Venky

Topics:
Tyler Cowen considers the following as important: , ,

This could be interesting, too:

Tyler Cowen writes New evidence that amino acid mutations matter for contagiousness

Tyler Cowen writes My Conversation with Annie Duke

Tyler Cowen writes Why American lockdown exceptionalism?

Tyler Cowen writes China update of the day

The largest economic cost of the COVID-19 pandemic could arise from changes in behavior long after the immediate health crisis is resolved. A potential source of such a long-lived change is scarring of beliefs, a persistent change in the perceived probability of an extreme, negative shock in the future. We show how to quantify the extent of such belief changes and determine their impact on future economic outcomes. We find that the long-run costs for the U.S. economy from this channel is many times higher than the estimates of the short-run losses in output. This suggests that, even if a vaccine cures everyone in a year, the Covid-19 crisis will leave its mark on the US economy for many years to come.

That is from a new NBER working paper by Julian Kozlowski, Laura Veldkamp, and Venky Venkateswaran.

The post The Long-Term Belief-Scarring Effects of COVID-19 appeared first on Marginal REVOLUTION.

Tyler Cowen
Tyler Cowen is an American economist, academic, and writer. He occupies the Holbert C. Harris Chair of economics as a professor at George Mason University and is co-author, with Alex Tabarrok, of the popular economics blog Marginal Revolution. Cowen and Tabarrok have also ventured into online education by starting Marginal Revolution University. He currently writes the "Economic Scene" column for the New York Times, and he also writes for such publications as The New Republic, the Wall Street Journal, Forbes, Newsweek, and the Wilson Quarterly.

Leave a Reply

Your email address will not be published. Required fields are marked *