Oireachtas Joint and Select Committees
Thursday, 3 June 2021
Committee on Budgetary Oversight
Budget Priorities Exiting Covid-19 Pandemic: Discussion
Dr. Stephen Kinsella:
It is the broad-based nature of it. As I said, it is about the median voter and the median household. It is about the fact that we now have very large societal consensus around this issue. One can see the diametric difference in an issue such the handling of the pandemic versus housing. I have demonstrated one variable; I could show five more. It is a policy variable because it alters expectations. By altering expectations, it alters behaviour today.
On the question of how anger can be measured economically, it can be measured economically by looking at the degree to which the pronouncements of policy and the actual allocations of funding alter with respect to expressions of anger.
The second point the Deputy raised concerned forecasting beyond our pre-Covid activity and why, given an expansion of economic activity that will be vast, particularly in the third and fourth quarters of this year, we will not see a resumption of unemployment levels at their pre-Covid levels. The answer is related to hysteresis. Hysteresis is a fancy word for economic scarring. For example, it occurs where certain sectors of the economy are scarred by the crisis that has come upon them. The canonical explanation or understanding for this is demonstrated through the example of the introduction of the motor car. When it was introduced, there were many people who worked with horses whose skills were no longer needed. It is the same idea. It is often used in the context of technological change. Obviously, Covid-19 has spurned lots of technological change. We are talking to each other on Microsoft Teams. That is the perfect illustration of what I am talking about. I did not get into my car and drive up to Dublin. I did not book into a hotel the night before the meeting. That is all demand that is no longer happening. It is the perfect example of hysteresis. If people do not go back into the offices, then people who sell sandwiches in sandwich bars do not have jobs.