COVID-19 and the economists’ redemption

The following article first appeared in the INOMICS Handbook 2021.

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During a visit to the London School of Economics in November 2008, the Queen asked her hosts why no one saw the financial crisis coming. It took the professors nine months to come up with an excuse, set out in a letter in July 2009:

Thus, Your Majesty, the failure to foresee the timing, scope and severity of the crisis and prevent it, although it had many causes, was basically the fault of the collective imagination of many bright people, both in this country and abroad. to understand the risks to the system as a whole.

Over the next decade, economists sought to repair damage to the reputation of their profession. These self-serving experts realized the need to restore public confidence in their work. Economists have committed themselves to participating in public debate, and all economics curricula have been redesigned. Many have sought to expand their horizons through interdisciplinary work with other scientists, which has so far been less common in economics than in other social sciences (see Figure 1).

However, despite these efforts, the general attitude towards economists has changed little. In the United Kingdom, a majority of voters opted to leave the European Union, ignoring the widely held belief among economists that doing so would cost them materially. According to a 2017 YouGov poll, economists were among the least trusted of the “experts,” with only politicians faring worse (see Chart 2).

In fact, the lack of confidence in economists is nothing particularly new. As early as 1925, Frank Fetter wrote in the American Economic Review about the relationship between economists and the public, stating:

Academic economists incur the mistrust of the public because they must echo and reflect the opinions of the business world, while business distrusts them as dangerous radicals because they refuse to worship the altar of mammon.

As with the lack of foresight before the 2008/09 financial crisis, few economists foresaw the approach of COVID-19. The economic impact of the pandemic is enormous.
However, since its underlying cause is biological, there were fewer accusations against economists this time around. On the contrary, the wide-ranging consequences of COVID-19
provided economists with many new opportunities to demonstrate their value to the world. There has been a surge in demand for key skills in statistical analysis and forecasting as governments around the world face major choices weighing the costs and benefits of different policy options. Economists have found their moment.

The following table lists the initiatives taken in response to the pandemic by some of the major academic organizations and think tanks in the field of economics. Along with writings about the overall impact of the pandemic on the economy, other articles focus more directly on the social and health consequences of various lockdown measures. Key Features
many of these studies use the traditional and simple economic approach to problem solving: trade-off analysis and optimization in a “second best” world.

The recent hive of activity among economists is not limited to academia. Indeed, there has been a broader awareness in society that an understanding of statistics is critical to crisis management. The radical changes in daily life imposed by governments around the world have increased uncertainty and the need to cope with it. Economists were urged to reassess markets amid the lockdown, advise governments on new monetary and fiscal measures to mitigate the economic impact of COVID-19, and provide more direct assistance in modeling and predicting the epidemiology of the disease itself.

One of my own areas of research, the volunteer sector and donor behavior, has led to me being commissioned to analyze the fundraising market on behalf of charities in the UK. My co-author Cathy Pharoah and I looked at the impact of the pandemic on both the various income streams of charities and the new needs for their services. We measured the relationship between donor trends and economic growth over the past decades to predict the future trajectory of philanthropic giving based on current government GDP forecasts, recognizing very large differences between best and worst case scenarios. In our research report, we outline some key points for fundraisers to keep in mind to encourage them to think more like economists when planning their messages and focus on what is in their power while being ready to adapt to new developments as they happen. occurrence.

The US Bureau of Labor Statistics already anticipated higher job growth for economists than for other professions in the coming decade (up 14% vs. 4%, see below). here. The increased use of big data for pricing and advertising, in tandem with a more complex and competitive global economy, has been cited as a major driver of projected job growth. The coronavirus pandemic is only accelerating these processes.

Economists are trained to analyze data and are equipped with tools to help them make decisions in the face of uncertainty, whether at the individual, group or community level. While economists may not have been relegated to “essential workers” as the health crisis has unfolded, they are in a better position than most to show ways out of it and think further. Economists also belong to a group of professionals who can do their work remotely. Perhaps it is only through isolation and social distancing that epidemiologists and public health scientists at the London School of Hygiene and Tropical Medicine have so far escaped royal scrutiny for the lack of preventive measures against COVID-19. Economists, who already suffered this fate when the previous crisis hit, now have a great chance to redeem themselves. Many of them are already benefiting from it.

The above article first appeared in the INOMICS Handbook 2021.

Download the INOMICS guide



References

Fetter F.A. (1925) “Economists and the Public”, The American Economic Review 15(1), 13-26.

Fourcade, M., E. Ollion, and I. Algan (2015) “Economist Excellence,” Journal of Economic Perspectives 29(1), 89-113.