What can we look forward to this summer?
There’s a good chance that a large swath of the population—maybe half, maybe more—will be vaccinated by then, and that should make a huge difference. We could look at where the (economic) decline was worst: air travel, local retail, going to a store, restaurants. I don’t think they’ll go up to the level before the pandemic, but some things that have declined greatly probably will improve. Housing is another possibility. People are tired of their old furniture or drapes in their houses and may want to remodel or buy a bigger house. One can imagine that taking off.
What have economists found about consumer spending overall during the pandemic?
There has been study of whether the fall in local businesses, say restaurants and local retail, is due to government lockdowns or because people on their own, even before lockdown happened, were reluctant to go shopping. The evidence is pretty strong it’s the behavior of consumers. Including in California, people stopped going to restaurants before the governor imposed restrictions. (The studies were) looking at mobility data from cellphones, another one looks at credit card transactions. When did they fall? The evidence is it was largely consumer behavior.
Once people feel safe again, will we see costs rise? Could a place like Disneyland double its admission price?
Often, firms are reluctant to increase prices. Clearly that happened with the great toilet paper shortage. There was a shortage rather than an increase in price. Sometimes firms prefer long lines rather than to hike prices—take Apple with its iPhones. It purposely kept the price lower than what demand was. We know that because of prices on eBay for the iPhone, and there were long lines and lots of publicity. So one can easily imagine that Disneyland may limit entry rather than charge $200 for a visit. (That would) encourage people not to be fearful to come and show that there are tens of thousands of people who want to come.
Will airlines and hotels hike their prices?
With airlines, they got large federal bailouts twice. I think that if they increase prices and see big profits, there will be political backlash. Another factor is business travel will probably decline because firms have figured out that they might not need as much business travel. They’ve learned to use Zoom. So that will reduce demand for airlines and hotels. When something is shut down, people learn how to substitute. Once it’s reopened, they continue to use what they learned.
Will people be more thoughtful about spending locally?
I haven’t seen evidence of people behaving that way. My belief is that Orange County has many more chain stores than individually owned ones, so I think there will be less caring about the local businesses. Orange County is such a large metropolitan area. If I’m in a small city and there’s only one Italian restaurant, then I may want to keep it in business because if that one Italian restaurant goes out of business, then I have no Italian restaurant. But we’re a huge metropolitan area. If my favorite Italian restaurant closes down, there are 50 others within a half-hour drive.