The Pandemics' Windfall for Homo economicus

As a former Economics professor, I believe the pandemic has done more damage globally in upward wealth distribution than in death toll. Since the start of 2020, thanks to lockdowns, stimulus packages and near-zero interest rates, the richest 1% of Americans “increased” their wealth surplus over the bottom 50% by an additional $9.3 trillion. An analysis by the New York Times blames part of this growing inequality on Fed policies:

Is the stunning growth in U.S. inequality all the Fed’s fault? Of course not. Tax policy has favored the wealthy and corporations for decades, to name one other cause. But income and wealth inequality result from who gets the money. And the Fed has unrivaled power over who gets the money across markets, communities and even families...

What about Americans who are trying to get ahead not through assets, but through saving? Even low-income households are doing their best to save a surprising amount of money. But the Fed’s interest-rate policy robs savers of any interest they might see.

More jobs were lost in the US in early 2020 than over the entire Great Recession of 2008-09, with lower-paid workers taking the largest hit according to an analysis by Furceri et al. who also review historic data to warn us that:

“Pandemics lead to a persistent and significant increase in the net Gini measure of inequality [see below for definition of Gini]… Early assessments of some government programmes enacted to combat COVID-19 suggest that the rich are the major beneficiaries.”

Gini coefficient, named after statistician Corrado Gini, is a collective measure of income or wealth inequality within a nation or a social group. A Gini coefficient of 0 means everyone has the same income, while a Gini coefficient of 1 (or 100%) means maximal inequality where only one person has all the income and all others have none.

I believe spikes in Gini will translate to spikes in homelessness, violence, drug abuse, and social and mental disorders. We may already be seeing some of the impacts in the society as reflected in recent comments by Starbucks CEO:

Ray Armat, Ph.D. @RayArmat

#Starbucks CEO warns of a bleak future: "A primary concern of our retailers is their personal safety & what happens in bathrooms & mental illness & #homelessness & crime Starbucks is a window into America We're closing stores & This is just the beginning"

But disorder and disease are nothing new in human evolution. In my book, I draw from first principles in neuroscience, biology, physics, economics and psychology to identify the underlying cause of diseases and disorders among humans. What we see today as an unprecedented reverse (upward) liquidity flow resembles upward flow of liquids through a funnel and is the signature non-linear exponential growth pattern associated with Homo economicus (detailed in my book).