Imagine a science-fiction movie – or computer program – designed to model behavior when changes are introduced. The Matrix, The 13th Floor, and A Sound of Thunder are but a few of several such examples where a small historical change gave rise to significant future consequences.
And now you’re a programmer interested in seeing how people will react economically to a health crisis.
The pandemic strikes. Will people change their behaviors – and if so, how?
With the COVID-19 pandemic, there was immediate panic: the stock market lost 35% in the early part of 2020. Emergency laws were enacted, and many people suddenly had to work remotely. Businesses closed. Travel was curtailed. Many things were put on hold. Heck, “life” was sort of put “on hold” and we are already referring to the “COVID imposed time warp” as “pre-COVID”.
The Federal Reserve, working hard to maintain a strong economy, kept interest rates artificially low during the pandemic. Inflation was under control. And these – and other actions – seemed to work. Despite the dramatic fall in early 2020, the stock market fully recovered. So, maybe “patience is a virtue”?
What about the behavior? People really started to think about how they were going to spend their time, especially work hours. If one is going to work remotely, is THIS where I want to spend my entire day?
By spending less and saving more, where is the best place to put the money? Low-interest rates…
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