Photo by Emily J. Davis
What can we look forward to this summer?
There’s a good chance a large section of the population – maybe half, maybe more – will be vaccinated by then, and that should make a big difference. We could see where the (economic) decline was worst: air travel, local retail, store visits, restaurants. I don’t think they will hit pre-pandemic levels, but some things that have declined sharply are likely to improve. Housing is another option. People are fed up with the old furniture or curtains in their homes and may want to remodel or buy a larger house. One can imagine that.
What did economists find out about overall consumer spending during the pandemic?
It examined whether the decline in local businesses, such as restaurants and retail stores, was due to government lockdowns or to reluctance to shop themselves even before lockdowns occurred. The evidence is pretty strong, it’s consumer behavior. In California, including, people stopped going to restaurants before the governor placed restrictions. (One study looked at cell phone mobility data, another looked at credit card transactions. When did it fall? The evidence is that it was largely consumer behavior.
When people feel safe again, will costs go up? Could a place like Disneyland double its entry price?
Companies are often reluctant to raise prices. Obviously, this happened with the great lack of toilet paper. There was a shortage rather than a rise in price. Sometimes companies prefer long lines rather than raising prices – take Apple with its iPhones. The price was deliberately kept lower than the demand. We know this from the iPhone prices on eBay, and there were long lines and lots of advertising. So it’s easy to imagine Disneyland restricting entry instead of charging $ 200 to visit. (That would) encourage people not to be afraid to come and show that there are tens of thousands of people who want to come.
Will airlines and hotels raise their prices?
In the case of airlines, they received major federal rescue operations twice. I think if they raise prices and make big profits there will be political backlash. Another factor is that business travel is likely to decline because companies have figured out that they may not need as much business travel. You learned to use zoom. That will reduce the demand for airlines and hotels. When something shuts down, people learn how to replace it. Once it is open again, they will continue to use what they have learned.
Will people be more thoughtful about spending on the ground?
I haven’t seen any evidence that people behave like this. In my opinion, Orange County has a lot more chain stores than privately owned ones, so I think local businesses will care less about them. Orange County is such a large metropolitan area. If I’m in a small town and there is only one Italian restaurant, I might want to keep it in business because when that one Italian restaurant is out of service I don’t have an Italian restaurant. But we are a huge metropolitan area. When my favorite Italian restaurant closes, there will be 50 more within half an hour’s drive.