Coronavirus Perceptions And Economic Anxiety (2003.03848v4)

Abstract: We provide one of the first systematic assessments of the development and determinants of economic anxiety at the onset of the coronavirus pandemic. Using a global dataset on internet searches and two representative surveys from the US, we document a substantial increase in economic anxiety during and after the arrival of the coronavirus. We also document a large dispersion in beliefs about the pandemic risk factors of the coronavirus, and demonstrate that these beliefs causally affect individuals' economic anxieties. Finally, we show that individuals' mental models of infectious disease spread understate non-linear growth and shape the extent of economic anxiety.

• The paper reveals that pandemic-induced economic anxiety is driven by subjective risk perceptions and compromised mental models during COVID-19.
• It uses global internet search trends and US survey responses to demonstrate a significant rise in crisis-related queries and financial uncertainty.
• Experimental results show that framing COVID-19 mortality as exceptionally high amplifies economic fears, underscoring the need for clear public communication.

Analyzing the Growth of Economic Anxiety During the Onset of the COVID-19 Pandemic

The paper "Coronavirus Perceptions and Economic Anxiety" investigates the escalating levels of economic anxiety experienced at the beginning of the COVID-19 pandemic, with particular focus on how individual beliefs and mental models affect this anxiety. Utilizing global data from internet searches alongside survey data from the United States, the authors explore the causal determinants of economic anxiety in relation to perceptions of pandemic risk factors.

At its core, the research evaluates the influence of subjective beliefs regarding the risks associated with the pandemic, examining how these beliefs shape perceptions of economic threat. With the sudden onset of coronavirus, which presented a unique and largely unfamiliar economic disturbance, the ability of individuals to form accurate beliefs was somewhat compromised. The paper highlights how, distinct from standard economic downturns, the pandemic caused an immediate and widespread disruption. The authors emphasize that pre-existing mental models and the lack of historical parallels posed additional challenges in accurately understanding the crisis.

Key Findings

1. Increase in Internet Search Activity:
   • The paper observes that once COVID-19 reached a country, there was a significant surge in Google searches related to "Recession" and "Stock Market Crash," alongside searches indicating personal crises, such as "Survivalism." This surge is indicative of elevated economic anxiety during this period.
2. US Survey Data Analysis:
   • Surveys conducted shortly after the virus appeared in the US reveal that people's perceptions of the crisis severity and economic concerns escalated dramatically. Throughout early March 2020, as the virus propagated rapidly, there was a notable increase in the proportion of people concerned about both their personal financial situations and the broader US economy.
3. Causal Determinants of Anxiety:
   • Experimental manipulations in the surveys examined how variations in information — both framed and factual — affected economic anxiety. Information detailing the relative mortality rate of COVID-19 proved particularly impactful; framing mortality as significantly higher than the flu notably increased perceived economic anxiety.
4. Influence of Mental Models:
   • The paper highlights misperceptions regarding disease spread. Respondents generally underestimated the non-linear growth of infections (exponential growth bias). Participants displaying better understanding of exponential growth were significantly more worried about the aggregate economic impacts, suggesting that accurate mental models amplify perceived risk.

Implications and Future Directions

The findings underscore the critical role of precise public communications in managing economic expectations during health crises. By providing accurate and appropriately framed information, policymakers can mitigate unnecessary fears and potentially stabilize economic perceptions. Moreover, understanding mental models in relation to exponential growth could serve as a tool for assessing public readiness and response strategies during pandemics.

The paper's approach, examining both psychological mechanisms and real-time data, provides a valuable framework for future research on crises and economic sentiment. The connections between belief systems, information dissemination, and economic behavior present open avenues for further exploration, particularly as we look towards managing future global crises.

Overall, "Coronavirus Perceptions and Economic Anxiety" furnishes an analytical perspective on the intersection of public perception and economic response, providing a framework for future studies in economic psychology and public policy.