All of us are experiencing what will be remembered for the next generations as CoronaVirus epidemic disease. More precisely, we have no idea at this moment on how the virus is going to evolve over time. What we are almost certain about is its effects on our economy in short-medium term. What we can forecast is the effects on people and their networks in long-term. Here, I will present some very preliminary comments on different aspects of this crisis that people have to deal with.
Supermarkets: The economy works differently than most people think. Our economies are based on a competitive market and some regulations to protect the property rights. But why cannot this huge system of theories, technology and regulations provide you with toilet paper these days? Again, like most of the economists I have to mention the classic terms of demand and supply. In short-run, demand is more elastic than supply. It means that it is easier for 1 family to buy 100 more toilet paper rolls than for 100 families to produce 1 more roll. For increasing the manufacturing level, you need machines, labour, transportation and most importantly time to combine these inputs. In short-term, the stock of super markets and firms runs out of toilet paper, because millions of people are going to increase their demand to be able to stock dozens of rolls in their homes! It should not be surprising that maybe for one to two weeks, you have to use a sort of substitute good for toilet paper. We economists just like other people, also need these products. Trying to compromise the shortages of our economy does not pay our bills, but it helps us to comprehend the situation of the real world, where things are different than people’s ideal world. On the other hand, when the pandemic situation ends, we will probably have better supply chain among the supermarkets, using Artificial Intelligence for matching the needs of the customers and the availability of the stock capacity. You will also be able to download more efficient applications to order products from your local suppliers.
Culture and Networks: I assume CoronaVirus will make hygienic products more profitable, leading to a long-time increase in the production of hand sanitizing gels for isntance. This increase will lead to a significant decrease in the price of such products. The awareness we gain regarding our health and hygiene, can be one of the very few advantages we can get during this crisis. Public places, like restaurants, bars and clubs will be under pressure to increase the standards in their environment. There will be worries about the seasonal flu for some years, leading to a greater loss of schooling/working hours in the upcoming cold seasons. Elderly will receive less visits around Christmas and new years’s eve, which can be sort of appreciated also for some of the youth!
Do I have to panic when I cough hard or have unusual fever? Sorry to say, if you live in the Northern Hemisphere and you have problems with your respiratory system and you are more than 80, maybe yes you should. Stay in home and follow the instructions of your local government for treatment. CoronaVirus does not threaten you if you take it seriously (No Panic though). Scientists are working hard in research laboratories around the globe to produce the vaccination and effective medicine. You will never be hurt if you trust scientific procedure! Just stay at home and protect yourself until the medicine will be in all the pharmacies!
Siavash Mohades 