Economic Recovery: V, U or W-curve?

KOMPAS/RONY ARIYANTO NUGROHO

People brave the heat on Saturday (19/9/2020) as they queue to receive their cash aid at the Bondongan subdistrict office in South Bogor district, Bogor, West Java. At least 1,022 local residents are registered as social assistance recipients with the Bondongan office, which has implemented a scheduling system to serve the residents of three out of the subdistrict’s 20 community units (RW) per hour.

Staff writer Derek Thompson of The Atlantic once wrote that the most rational approach to studying human behavior was to assume that it was irrational.He wrote this in his article on Richard Thaler, the 2017 Nobel laureate in economics and a pioneer of behavioral economics at the University of Chicago. We can argue about this. Thompson seems to be scoffing, but he might be right.

Thaler indeed provides an interesting example using Spock and Homer Simpson. Economists, according to him, often assume that economic actors are like Spock, the fictional character in the Star Trek franchise who is cold, rational, and always makes careful calculations. Unfortunately, humans are generally more like Homer, the fictional character in The Simpsons cartoon. Homer is messy. He is fat because he eats junk food, he is lazy and prone to sudden bursts of anger. His decisions are not calculated.