‘To investigate the means through which these shifts could happen—and the likelihood that they will—we identified three main ways the coronavirus could shape the economy long after the pandemic has subsided:
- Habits could evolve, causing lasting change in consumer behavior. As an example of the impact of habits, consider the rise of recycling in the United States over the past several decades. This shift was due in part to the advent of Earth Day in 1970 and the nationwide campaign encouraging Americans to "reduce, reuse, recycle." The Environmental Protection Agency reported that 34.7% of municipal solid waste was recycled in 2015, as compared with 6.6% in 1970.
- Fear can make consumers reluctant to engage in certain activities—in this case, fear of the next pandemic (including a COVID-19 resurgence). An instance where fear led to consumer shifts is when research in the 1960s demonstrated the health risks of smoking cigarettes. This led to a permanent reduction in cigarette sales—approximately 42% of U.S. adults smoked in 1964, compared with approximately 19% in 2011.
- Sunk costs, or costs that have already been incurred and cannot be recouped, could change the long-term plans of consumers and firms. A classic example of sunk costs is the Concorde. British and French manufacturers poured such exorbitant sums into developing the aircraft in the 1950s and 1960s that the jet never became profitable over the decades it was commercially available. (This was such a notorious incident that the sunk-cost fallacy is sometimes also referred to as the Concorde fallacy.)
