[BostonCard]

With a hat tip to marketplace for this paper...

https://www.frbsf.org/economic-research/...020-09.pdf

I’m just going to shoot it into Mick’s veins.

We study rates of return on assets using a dataset stretching back to the 14th century, focusing on 15 major pandemics where more than 100,000 people died. In addition, we include major armed conflicts resulting in a similarly large death toll. Significant macroeconomic after-effects of the pandemics persist for about 40 years, with real rates of return substantially depressed.

So basically, we will feel reverberations or this for the rest of my life.  The good news, such as it is, is that wages do go up after pandemics.

BC

[BostonCard]

With a hat tip to marketplace for this paper...

https://www.frbsf.org/economic-research/...020-09.pdf

I’m just going to shoot it into Mick’s veins.

We study rates of return on assets using a dataset stretching back to the 14th century, focusing on 15 major pandemics where more than 100,000 people died. In addition, we include major armed conflicts resulting in a similarly large death toll. Significant macroeconomic after-effects of the pandemics persist for about 40 years, with real rates of return substantially depressed.

So basically, we will feel reverberations or this for the rest of my life.  The good news, such as it is, is that wages do go up after pandemics.

BC

[Mick]

With a hat tip to marketplace for this paper...

https://www.frbsf.org/economic-research/...020-09.pdf

I’m just going to shoot it into Mick’s veins.

We study rates of return on assets using a dataset stretching back to the 14th century, focusing on 15 major pandemics where more than 100,000 people died. In addition, we include major armed conflicts resulting in a similarly large death toll. Significant macroeconomic after-effects of the pandemics persist for about 40 years, with real rates of return substantially depressed.

So basically, we will feel reverberations or this for the rest of my life.  The good news, such as it is, is that wages do go up after pandemics.

BC

Interesting find, BC. I would caution against drawing too many inferences from this paper about real wages caused by labor scarcity, given that the majority of the pandemics they investigated were:

- prior to the advent of sophisticated medicine and medical professionals
- Chiefly occurring during economies dominated by agricultural production and employment
- not during periods of advances in automation that threatened the work force
- deadly across a range of ages rather than (chiefly) an older population (acknowledged by authors in their last sentence)

Also didn't see mention of the effects of currency debasements (apropos of a paper written by a Fed economist, I suppose).

The big hope suggested by this paper is long term depression of real interest rates and lower overall return on assets, leading to governmental access to that putatively cheaper capital. We'll see.

It cites the Great Depression as following the Spanish Flu -- although it was about a decade before the GD hit. The '20s were quite prosperous, relatively speaking. In any event, like the GD, consumer demand will be depressed in a way that most don't understand; ergo, we're on our way to a much-greater-than-great Great Depression, particularly if a "W" or "Nike" economic "recovery" is the result. If you're seeking good economic news, don't read Nobel-prize winning economist Joseph Stiglitz, who foresees a 30% unemployment rate, which equates to 49.38 million unemployed, based on February 2020's available work force of 164.6 million people.

[Mick]

With a hat tip to marketplace for this paper...

https://www.frbsf.org/economic-research/...020-09.pdf

I’m just going to shoot it into Mick’s veins.

We study rates of return on assets using a dataset stretching back to the 14th century, focusing on 15 major pandemics where more than 100,000 people died. In addition, we include major armed conflicts resulting in a similarly large death toll. Significant macroeconomic after-effects of the pandemics persist for about 40 years, with real rates of return substantially depressed.

So basically, we will feel reverberations or this for the rest of my life.  The good news, such as it is, is that wages do go up after pandemics.

BC

Interesting find, BC. I would caution against drawing too many inferences from this paper about real wages caused by labor scarcity, given that the majority of the pandemics they investigated were:

- prior to the advent of sophisticated medicine and medical professionals
- Chiefly occurring during economies dominated by agricultural production and employment
- not during periods of advances in automation that threatened the work force
- deadly across a range of ages rather than (chiefly) an older population (acknowledged by authors in their last sentence)

Also didn't see mention of the effects of currency debasements (apropos of a paper written by a Fed economist, I suppose).

The big hope suggested by this paper is long term depression of real interest rates and lower overall return on assets, leading to governmental access to that putatively cheaper capital. We'll see.

It cites the Great Depression as following the Spanish Flu -- although it was about a decade before the GD hit. The '20s were quite prosperous, relatively speaking. In any event, like the GD, consumer demand will be depressed in a way that most don't understand; ergo, we're on our way to a much-greater-than-great Great Depression, particularly if a "W" or "Nike" economic "recovery" is the result. If you're seeking good economic news, don't read Nobel-prize winning economist Joseph Stiglitz, who foresees a 30% unemployment rate, which equates to 49.38 million unemployed, based on February 2020's available work force of 164.6 million people.

[ChicagoCard]

I couldn't resist. I used the search feature of this board where you can pre-select an individual poster and searched on "Great Depression". I only checked the one result out of eleven that wasn't on the Covid-19 forum. 11 different posts, threads, by one poster referring to the Great Depression. 

[ChicagoCard]

I couldn't resist. I used the search feature of this board where you can pre-select an individual poster and searched on "Great Depression". I only checked the one result out of eleven that wasn't on the Covid-19 forum. 11 different posts, threads, by one poster referring to the Great Depression. 

[2006alum]

(Glances at last post in those threads.) Well, at least I'm not imaging things in thinking my responses to said invocations of a great depression often go unanswered. ;)

[2006alum]

(Glances at last post in those threads.) Well, at least I'm not imaging things in thinking my responses to said invocations of a great depression often go unanswered. ;)

[BostonCard]

I think the criticisms of the study are valid.  Thankfully, we have not had a large number of pandemics in the modern era.  I also think it's a bit odd that they set a threshold of 100,000 dead, when the population has changed over time.

It was an interesting analysis because as mentioned there is a difference between wars and pandemics.  Wars destroy the capital stock and kill a lot of people, while pandemics kill a lot of people but don't destroy the capital stock.  So, it is reasonable to expect that a pandemic will erode the return on capital while potentially improving the bargaining power of the workers who remain (this is over the long term; acutely, as you note, we will have plenty of workers).

I do think the recovery will be sharp but partial at first, and then slow after that.  For example, take all the people who were furloughed from Disney.  The park will reopen at some point, and when it does most of them will be rehired.  When airlines, hotels, and restaurants reopen, not all will go bankrupt and though their labor needs will be much lower than they were pre-pandemic, they will be higher than they are now.  So we will partially bounce back from the current level of unemployment.  Of course, some of the employment cuts will be permanent and many small businesses will go bankrupt.  After an initial partial bounceback, then there will be a long, slow slog.  The question will be what will the unemployment level be a year from now?  I don't expect it to be 25% and I don't expect it to be 4%.

BC

[BostonCard]

I think the criticisms of the study are valid.  Thankfully, we have not had a large number of pandemics in the modern era.  I also think it's a bit odd that they set a threshold of 100,000 dead, when the population has changed over time.

It was an interesting analysis because as mentioned there is a difference between wars and pandemics.  Wars destroy the capital stock and kill a lot of people, while pandemics kill a lot of people but don't destroy the capital stock.  So, it is reasonable to expect that a pandemic will erode the return on capital while potentially improving the bargaining power of the workers who remain (this is over the long term; acutely, as you note, we will have plenty of workers).

I do think the recovery will be sharp but partial at first, and then slow after that.  For example, take all the people who were furloughed from Disney.  The park will reopen at some point, and when it does most of them will be rehired.  When airlines, hotels, and restaurants reopen, not all will go bankrupt and though their labor needs will be much lower than they were pre-pandemic, they will be higher than they are now.  So we will partially bounce back from the current level of unemployment.  Of course, some of the employment cuts will be permanent and many small businesses will go bankrupt.  After an initial partial bounceback, then there will be a long, slow slog.  The question will be what will the unemployment level be a year from now?  I don't expect it to be 25% and I don't expect it to be 4%.

BC

[Genuine Realist]

I think the criticisms of the study are valid.  Thankfully, we have not had a large number of pandemics in the modern era.  I also think it's a bit odd that they set a threshold of 100,000 dead, when the population has changed over time.

It was an interesting analysis because as mentioned there is a difference between wars and pandemics.  Wars destroy the capital stock and kill a lot of people, while pandemics kill a lot of people but don't destroy the capital stock.  So, it is reasonable to expect that a pandemic will erode the return on capital while potentially improving the bargaining power of the workers who remain (this is over the long term; acutely, as you note, we will have plenty of workers).

I do think the recovery will be sharp but partial at first, and then slow after that.  For example, take all the people who were furloughed from Disney.  The park will reopen at some point, and when it does most of them will be rehired.  When airlines, hotels, and restaurants reopen, not all will go bankrupt and though their labor needs will be much lower than they were pre-pandemic, they will be higher than they are now.  So we will partially bounce back from the current level of unemployment.  Of course, some of the employment cuts will be permanent and many small businesses will go bankrupt.  After an initial partial bounceback, then there will be a long, slow slog.  The question will be what will the unemployment level be a year from now?  I don't expect it to be 25% and I don't expect it to be 4%.

BC

Predictions are interesting, but if history is any guide, no one is going to get it right.

My own thought is that we are going to discover how capital intensive our economy has actually become, with more of the labor force redundant than we would like to think. That would seem to me to lead to an enormous growth in service industries (delivery and chauffeur, tutoring, etc.), supplemented by UBI because we need a consumer base large enough to fuel the economy. I don't like this Downton Abbey world one little bit, and I don't think it's stable in the long run

[Genuine Realist]

I think the criticisms of the study are valid.  Thankfully, we have not had a large number of pandemics in the modern era.  I also think it's a bit odd that they set a threshold of 100,000 dead, when the population has changed over time.

It was an interesting analysis because as mentioned there is a difference between wars and pandemics.  Wars destroy the capital stock and kill a lot of people, while pandemics kill a lot of people but don't destroy the capital stock.  So, it is reasonable to expect that a pandemic will erode the return on capital while potentially improving the bargaining power of the workers who remain (this is over the long term; acutely, as you note, we will have plenty of workers).

I do think the recovery will be sharp but partial at first, and then slow after that.  For example, take all the people who were furloughed from Disney.  The park will reopen at some point, and when it does most of them will be rehired.  When airlines, hotels, and restaurants reopen, not all will go bankrupt and though their labor needs will be much lower than they were pre-pandemic, they will be higher than they are now.  So we will partially bounce back from the current level of unemployment.  Of course, some of the employment cuts will be permanent and many small businesses will go bankrupt.  After an initial partial bounceback, then there will be a long, slow slog.  The question will be what will the unemployment level be a year from now?  I don't expect it to be 25% and I don't expect it to be 4%.

BC

Predictions are interesting, but if history is any guide, no one is going to get it right.

My own thought is that we are going to discover how capital intensive our economy has actually become, with more of the labor force redundant than we would like to think. That would seem to me to lead to an enormous growth in service industries (delivery and chauffeur, tutoring, etc.), supplemented by UBI because we need a consumer base large enough to fuel the economy. I don't like this Downton Abbey world one little bit, and I don't think it's stable in the long run

[BostonCard]

My instinct is that you are probably right.

No one will get it right, and there will certainly be things that nobody anticipated would happen.  For example, there is a tail risk that as an indirect consequence of this pandemic a major war will break out.  That being said, I think the predictions are interesting and can be helpful for offering some insight into the range of possible outcomes, especially if you look at all the predictions that will come out.

BC

[BostonCard]

My instinct is that you are probably right.

No one will get it right, and there will certainly be things that nobody anticipated would happen.  For example, there is a tail risk that as an indirect consequence of this pandemic a major war will break out.  That being said, I think the predictions are interesting and can be helpful for offering some insight into the range of possible outcomes, especially if you look at all the predictions that will come out.

BC