How economic behavior will ‘settle into a new routine’ as the pandemic progresses

From grocery stores to governments to global financial markets, how will economic behavior continue to change in response to the ever-evolving conditions of the coronavirus pandemic?

Professor Doron Kliger, a faculty member in the Department of Economics at the University of Haifa, gave a videoconference briefing to the American Society of the University of Haifa (ASUH) community in mid-April on COVID-19’s implications for economic behavior. Yet since two months feels like an eternity in pandemic terms, ASUH recently caught up with Kliger for a more current assessment and analysis on the issue.

Kliger has been published in a wide range of journals on topics including asset pricing, behavioral economics and finance, decision-making, and industrial organization, in addition to serving as editor at multiple economic journals. He is a two-time recipient of the Institute of Certified Public Accountants Medal for excellence in accounting studies and the Israel Knesset Appreciation Certificate for excellence in studies. He was also awarded the Fulbright Fellowship by the United States — Israel Education Foundation.

In the following interview, Kliger unpacks the pandemic’s ongoing impact on individual and collective economic behavior.

Q: As Israel reopens and removes some coronavirus-related restrictions, what impact is this having on private citizens’ economic behavior?

A: “Some people miss the ‘old’ life habits, while others have discovered and became to like new ones. It varies among people and depends on a variety of factors, such as income, work type, and family structure. People are turning more to online purchases, for food but also other products. They are resorting to online meetings.”

Q: Along similar lines, what impact is the lifting of restrictions having on the Israeli government’s economic behavior and policy?

A: “As far as I see it, the focus has been mainly on health issues that are directly related to COVID-19. Other important issues, as well as health issues that are not directly related to coronavirus — like other illnesses requiring medical attention, and depression due to not working and being isolated — were set aside.

“For the Israeli people at-large, meanwhile, instances of behavioral fatigue have started emerging. A growing number of people are not strictly obeying ‘social distancing’ instructions. As an aside, I actually have a reservation regarding the term ‘social distancing.’ I think the wording should instead be ‘physical distancing while keeping social proximity.’”

Q: For global financial markets, the situation changes by the day and even by the minute. How should we expect this dynamic situation to continue to affect investors’ behavior during the pandemic?

A: “As we have been discussing, the situation is best described by what I have termed the ‘2nd-order’ chaotic system, meaning that predictions affect actions and thereby outcomes. Nevertheless, we see the continuation of the closing of gaps between economic predictions and markets’ actual behavior.”

Q: Once the pandemic is widely deemed over, what changes can we expect in the economic behavior of investors and consumers?

A: “I think that a more accurate term is that the pandemic will ‘settle into a new routine’ rather than being ‘over.’ There is still significant mileage to cover until we have a vaccination, and also toward herd immunity. There are losers, but also winners due to the new situation. Online activities in domains like work, sports, and leisure are the winners.”

Q: Similarly, what long-term changes can we expect in governments’ economic behavior?

A: “I hope, but I am not sure, that we will see some more social-supporting endeavors and some more intense poverty fighting on the government level. I hope that at the same time, these changes will avoid compromising privacy as much as possible.”

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