Event 1: Economic impact of food rationing during WWII

Short-term impact: Rationing in the United Kingdom due to World War II cut meat consumption there by 32%, fat and butter by 21%, sugar by 35%, and eggs by 64%. This behavior continued until rationing was relaxed in the 1950s.

Lasting effects: None. In fact not only did pre-war usage return after the war, it exceeded those levels.

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Event 2: Did WWII advance the rise of women in the workforce?

Short-term impact: There was a spike in women working outside the home due to men going off to fight, but that didn’t last. When men returned home, they went back to their old jobs.

Lasting effects: There was a 6% growth of women in the workforce after the war, which was about the same rate as in the decades since that time. Other factors may have played a larger role in the rise of women in the workforce, including increased demand for service-sector and office jobs, progress of maternity care, rise of feminism, invention of contraception and increase in education levels among women. However, a McKinsey study found that women’s jobs have been 1.8 times more vulnerable than men’s during the coronavirus pandemic, and although women make up 39% of the global workforce, they account for 54% of overall job losses.

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Event 3: How did Oil Price Shock of 1970s Impact Behavior

Short-term impact: When oil prices averaged $63 per barrel in the 1970s, a 250% jump from the average 1960s price, consumer response was immediate. Demand growth averaged 0.5% between 1974 and 1985, compared with 7.0% growth between 1940 and 1973, Caldwell states.
<br Lasting effects: Even when oil prices dropped, demand never caught up, he says. “Indeed, oil demand grew merely 1.7% from 1986 to 2000.” He states that sunk costs had a large impact on this situation, from political — fuel standards were never relaxed — to monetary — fuel-efficient cars, and the research and development that went into them — was the norm. Bottom line, “people never fully reverted to driving less-efficient vehicles,” he states.

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Event 4: Did 9/11 Permanently Depress Air Travel?

Short-term impact: A Gallup survey conducted immediately after 9/11 found that 43% of Americans were less willing to fly due to the attacks. This level remained at 30% throughout 2002.

Lasting effects: Although air travel continued to rise afterward, one area that did change was business travel. Many firms realized the technology substitutes used post-9/11 to do business, such as email, worked well enough to curb business travel. As Caldwall explains, “this caused a structure shift in the market and allowed more leisure-focused low-cost carriers to take on greater market share.”

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Events 5: How did previous pandemics affect behavior?

Short-term impact: The 1918-20 Spanish flu resulted in at least 50 million deaths worldwide. There was massive short-term impact, Caldwell states, such as mask-wearing mandates, school closures, social distancing and related efforts — much like today’s reaction to the coronavirus.

Lasting effects: There were not many from the Spanish flu. However, COVID-19 might have accelerated trends already taking place, such consumers doing more shopping online. It also may have created new trends, says Caldwell, like permanent shifts away from dine-in restaurants. He states, “equity markets are implying a major reshaping of the U.S. economy compared with how it looked before the pandemic.”

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Shocks to the system, both economic and behavioral, have come before the most recent coronavirus pandemic, explains a Morningstar analyst in the new study “What History Can Teach Us About the Post-COVID Economy.” The big question is, do the initial effects become long term?

To determine the likelihood of permanent shifts in long-term behavior after the current pandemic, Morningstar equity analyst and study author Preston Calwell used three factors — habits, fear and sunk costs, to study five previous global shocks.

In his analysis, Caldwell looked at how habits evolve and may cause lasting changes to consumer behavior. For example, he says, when Earth Day in 1970 was introduced, recycling grew considerably.

Fear certainly can make consumers reluctant to engage in certain activities. For example, when in the 1960s health risks in smoking were illustrated, and the number of smokers dropped from 42% of the U.S. adults in 1964 to 19% in 2011.

Finally, sunk costs, or those that have been incurred and cannot be recouped could change — or not — long-term plans of consumers and firms, Caldwell notes. One example is the Concorde, which its joint manufacturers spent large amounts of money to build and market, but the jet remained unprofitable despite decades of commercial use.

Caldwell reviews five events. He then examines how behavioral and economic factors changed in the short term and long term in an effort to forecast the impact of the cornonavirus on today’s and tomorrow’s economy.

For example, short-term behavior might mean wearing masks and avoiding eating out. Long-term consequence could include less in-store shopping, more firms allowing staff to work from home, and even less going to restaurants.

His conclusion is that any resulting changes should “be modest at best” and that that “consumer habits eventually revert, and fear eventually dissipates. It’s sunk costs that have the largest — yet still a modest — impact on long-term consumer behaviors,” Caldwell states.