How do top “economic minds” view the COVID-19 pandemic?
Date: 2020-11-01
Source: World Laureates Forum
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Forum · Record

With the COVID-19 pandemic come not only the public health issues, but also the ensuing global economic problems. The 3rd WLF Economic Summit focuses on the recovery and future trend of the global economy amid the COVID-19 pandemic, and sheds light on economic development.

On November 1, the last day of the forum, the WLF Economic Summit unveiled. Lars Peter Hansen, winner of the 2013 Nobel Prize in Economics, Thomas J. Sargent, winner of the 2011 Nobel Prize in Economics, Christopher A. Pissarides, winner of the 2010 Nobel Prize in Economics, Finn E. Kydland, winner of the 2004 Nobel Prize in Economics, and Gu Qiang, Dean of CFLD (China Fortune Land Development) Industry Research Institute, delivered brilliant speeches and had a panel discussion on the economic issues brought by the COVID-19 pandemic and under the spotlight globally.


Lars Peter Hansen’s speech addresses a common problem faced by economics and even other important disciplines about human development: uncertainty. Governments, enterprises or individuals are no strangers to anxiety caused by uncertainty. The same is true with the COVID-19 pandemic, which is also a “source of anxiety”: When will a vaccine be available? How will the economy respond to the COVID-19 pandemic? For a long time, economists have tried to eliminate uncertainty by building models, and they have made great contributions through model prediction.


Lars Peter Hansen Photo provided by Chicago Booth

Walking into the venue of the summit, you might think that you entered a “language class” by mistake. Thomas J. Sargent used a vivid metaphor to describe the COVID-19 pandemic in his speech: Isn’t the COVID-19 pandemic raging worldwide like a horrible military war? Social production and services have been greatly impacted by the COVID-19 pandemic. This reminds us of the fact that in a war, when a large amount of labor becomes soldiers, normal production and service often fall into recession.

How long will a war last? I am afraid no one will know. The repeated outbreaks of the COVID-19 epidemic are also unpredictable and leave people at a loss. How will a war affect the economy? Take World War I for example, many countries issued a large number of bonds to finance, and national and international debt became so high that they could only solve the problem by evading debt or increasing taxes. So, how can the economic problems resulting from the COVID-19 pandemic be solved optimally?

Christopher A. Pissarides focused on the employment and unemployment problems caused by COVID-19: Before the COVID-19 pandemic, although the trends such as automation and intelligence that had already appeared forced many workers to switch jobs, and many industries to make changes to their economic structure, the overall employment situation remained stable. For a long time after the strike of the COVID-19 pandemic, we have become accustomed to working from home. The fact is that the COVID-19 pandemic has amplified the digital features in the production process and accelerated the digitalization. As people become more accustomed to working from home, basic services such as restaurants and transportation will be affected, and education and lifestyle will also undergo further changes. 


Christopher A. Pissarides Photo provided by WLF 

What is the impact of “aging of population” on economic development? With the help of a computational model, Finn E. Kydland has concluded that in an aging society, if our population structure does not change, social economic production will drop by 17% by 2060, and by 39% by 2100.

Finn E. Kydland put forward a valuable suggestion: increasing the female labor force participation rate may make up for the labor gap caused by the large number of retirees. In recent years, the female labor force participation rate in Canada, the United Kingdom and other countries has been one the rise. But the United States is an exception. Why has the female labor force participation rate in the United States been declining for 20 years? Finn E. Kydland believes that this phenomenon is worthy of in-depth research and thinking.


Finn E. Kydland  Photo provided by WLF

Gu Qiang reviewed the impact of the COVID-19 pandemic on the economy by asking four questions: Will the COVID-19 pandemic change the pattern of urban development? Research data shows that the density of cities is not necessarily related to the pattern of the COVID-19 pandemic infection. Will urbanization inevitably lead to urban agglomerations? Will innovation make the world more “pointier”? In China, innovative elements continue to move to first-tier cities like Beijing and Shanghai, and innovation originates from high-quality element gathering and ecological construction. Judging from China’s experience, the new paradigm of spatial coupling between the “innovation peaks” of core cities and the “manufacturing highlands” in their surrounding areas has enhanced the overall competitiveness of the industries in urban agglomerations. This path may throw some new light on the development other developing countries.


Gu Qiang Photo provided by Xinhuanet

Will the COVID-19 pandemic change the trend of globalization? Gu Qiang’s answer is no. The international economic cycle among countries can drive the development of the world economy, from which every country will benefit. And effectively expanding domestic and international economic cycles will be the common choice of all countries.

The scientists attending the panel discussion also talked about the impact of the pandemic on people’s life, which shows the humanistic concern of economics. Gu Qiang pointed out that the impact of the COVID-19 pandemic on the poor is actually far greater than that on the rich. The rich have become richer due to the bull market. The economists should answer one question: How to prevent further widening of the income gap? How to help disadvantaged people, countries, and regions survive the crisis?

Thomas J. Sargent provided another opinion: some economists believe that the level of collective consumption depends on the level of wealth, while the stock market is an important indicator of the level of wealth. The Fed and the central banks of other countries neither aim to control the trends of stock markets, nor favor the rich. They believe that “a boat rises with the tide,” i.e., as long as the stock and bond markets perform well, both the poor and the rich will benefit and get an increase in wealth.


Thomas J. Sargent Photo provided by WLF

“You are right to say that a boat rises with the tide. But what if the boat is tilted at first?”

According to Christopher A. Pissarides, the impact of economy on each group is different, and a one-size-fits-all approach is not feasible. It can be easily seen that those who can work from home via the internet amid the COVID-19 pandemic mostly belong to high-income groups, while other groups such as couriers and salespeople cannot work from home. This is an even more insurmountable gap resulting from digitalization.

Facing the COVID-19 crisis, many people ask a question about choice: To fight the virus or maintain economic development? Are there conflicts between the two choices? Lars Peter Hansen’s answer is yes. When a government chooses measures such as lockdown to fight the epidemic, the economic structure and development will inevitably be affected. In fact, being confined at home will also lead to diseases and have a significant impact on the psychological state. Whether we are more experienced in dealing with economic problems when a new wave of epidemic strikes, vaccine will remain top of the agenda.

At the end of the Panel Discussion, economists made suggestions to young scholars in China and around the world.

“When you study math, the more the better.”–Finn E. Kydland

“The value of interdisciplinary economists will become more and more prominent.”–Christopher A. Pissarides