More Thought On The Post-Pandemic Economy

I have written before on the post-pandemic economy and how it should actually provide enormous opportunities, but it is worth clarifying a few points. First and most importantly, there is an important measurement issue with GDP that people will need to appreciate.

It is often said that GDP is not a good measure of well-being, we see this in a very big way in the post-pandemic period. It is likely that many of the changes in behavior forced by the pandemic, first and foremost telecommuting, will be enduring.

Most immediately, this will show up as a sharp drop in GDP. We will be consuming much less of the goods and services associated with commuting to and from work. This means that we will be driving less. That means we will be buying less gas and needing fewer cars, car parts, and care repair services. We’ll also need less auto insurance. In addition, there will be many fewer taxi or Uber trips, as well as trips on busses, trains, and other forms of public transportation.

There is also an economy built up around serving the people working in downtown office buildings. This includes the offices themselves and the people who service and clean them. There are also the restaurants, gyms, and other businesses that serve the people who come into the city to work each day. And, there are all the items that people have to spend money on for office work, such as business clothes and shoes and dry-cleaning services.

We will see a huge reduction in demand in all these areas if much of the work being done on-line stays on line. We will also see less business travel, which means fewer air plane trips, taxi rides, and stays in hotels.

This fall into demand will translate into a large loss of GDP, but it translates into very little by way of real loss in well-being. This doesn’t mean there will not be some loss. People may miss seeing work colleagues on a daily basis, or the opportunity to meet up with friends for lunch near the office. Some people may actually enjoy business travel. But the drop in GDP will dwarf whatever losses of these sorts people may feel, and in most cases they will be offset by gains, such as not having to spend two hours a day commuting and having more time to spend with friends and family.

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