A Lesson in Behavioural Economics During a Pandemic
It’s no surprise that the COVID-19 pandemic that came to the spotlight of global affairs in March of last year has had a massive impact on the global economy.
What many don’t realize is the role that they play as individuals in bringing forth such changes. Everyday choices that people make can have very large impacts on global health, as well as the international economy.
Behavioural economics is a field of study that focuses on psychoanalyzing the effect of an individual’s external and internal influences on their economic decisions. Through this process, economists around the world have been able to understand the effects of certain stresses on the human mind, and how they effect the economy as a whole.
According to the Economics Observatory, “Behavioural economics emphasizes the importance of expectations and beliefs”. This conceptualization can be applied to not only consumerism, but people’s general psychological responses to things such as the COVID-19 pandemic.
Individual beliefs regarding the pandemic have made a difference on the ability of the global community to mitigate and isolate the virus. Public measures, such as quarantining, have been heavily impacted by people’s perspectives and personal beliefs regarding the pandemic as a whole.
With regards to economics, people’s buying habits have changed drastically as a result of COVID-19. Specific industries have seen an incredibly high surges in prosperity since the start of the pandemic; these include disinfectants, protective equipment, and the healthcare industry as a whole.
The boom of these industries is not a coincidence; the external factors that have influenced people during this pandemic lead them to directing their consumerism towards specific industries that have shown to have massive surges.
A specific concept that has been conceptualized during the pandemic as a result of behavioural economics is a theory known as “behavioural fatigue”. This is the belief that people can only take so much cognitive demand before they begin to get restless, and they being to experience idiosyncrasies in their behaviour patterns.
According to the Head of European Staples and Beverages Research at J.P. Morgan, Celine Pannuti, the data that can be observed when examining the market growth of in-demand US industries shows just how drastically spending habits for individuals have made a difference on the market as a whole.
Pannuti said that “in the data earlier this year, you could see flat growth followed by a huge spike — double digit growth. That is very rare for this industry and was totally prompted by the lockdown and the fact that people couldn’t get out,”. The lockdown has effects of behavioural fatigue on people, which caused them to alter their spending habits with accordance to what they believed they needed during the pandemic.
Data from J.P. Morgan Researchers shows a stark leap, just as Pannuti pointed out, in the time that the pandemic and lockdowns started, around March of 2020.
The stresses imposed on people from being at home affected their perception of what they needed — individuals from across the world found themselves buying things that they normally would not purchase prior to the pandemic. This is why many economists from around the globe have been pinpointing the massive market increase on behavioural economics.
Going forward, as the pandemic continues to be the centre of public discussion, the concept of behavioural economics will continue to play its part in justifying why so many industries have seen a large growth during the pandemic that they would not have experienced prior to it.
The closely-knit relationship between behavioural economics and the pandemic will continue to become more evident as time goes by; and it is only time that will tell what will come next from the global economy as a whole as the psychological stresses on consumers persists.
