In Economics News…

Note: Although both of these publications normally charge for content, try clicking on the links anyway.  Many newspapers have eliminated paywalls for articles about the pandemic.

Grocers Revamp Inventory Strategies,’ Wall Street Journal, March 24, 2020, p. B1

For decades, companies that produce and distribute physical goods have obeyed a simple rule:  Minimize inventory. Instead of holding items in stock, make or deliver them “just in time.”

That works well in normal times, when there is a steady and predictable flow of demand. According to an executive quoted in this Wall Street Journal article, however, food sellers in March “sold three months of supplies in ten days.” 

Perhaps a better way to put it would be that retailers tried to sell three months of supplies.  As this same executive observed, “nobody keeps three months’ worth of anything anymore.”  Virus-related demand surged, the goods were simply not in the warehouse, and shelves could not be restocked.  About 80% of stores were completely out of toilet paper, 45% out of chicken breasts, and 25% out of eggs, according to the Journal’s own research.

The article did not address whether food distributors are ready to write the following epitaph: “Just in Time, Rest in Peace.”  It is not obvious that executives will give up the benefits of this proven supply system just because of what the article termed a “black swan event.”

We can nevertheless expect a larger inventory of toilet paper in retailers’ warehouses going forward.

The New Coronavirus Economy: A Gigantic Experiment Reshaping How We Work and Live,The Washington Post, March 21, 2020 

This broad discussion of life after the pandemic quotes several scholars who recognize that the crisis has the potential to transform society in a way that technological gradualism so far has not:

“It’s amazing how slowly habits change, where people get stuck in the ruts of doing things, and then you have a shock like this that can change everything,” said Erik Brynjolfsson, director of the MIT Initiative on the Digital Economy. “It forces people to overcome the switching costs, figure out something new and say, ‘Hey, this is way better.’ ”

A second observer argues that significant changes could be driven by our current period of enforced introspection.  With death a closer reality, some of us will inevitably question our values and behaviors; we will do so as we watch consumerism being crushed by a force of nature: 

“The coronavirus is creating a fundamental opportunity to remake the economy,” said Azeem Azhar, an analyst who runs the popular industry newsletter Exponential View. “People will sit down and reevaluate what life means to them, what they appreciate and what they can take away.”

The remainder of the article compiles a list of winners and losers arising from this logjam-breaking shock to the system (see summary below).  Many items on this list represent ongoing trends that the virus has accelerated. How complete or permanent the transformation proves to be is unknown.

Feel free to add your own items to this list from the Washington Post:

Shock Treatment:  Virus-induced structural transformation?

Losers Winners
Doing business face to face; Business travel Telecommuting;  Online meetings
Doctor visits Telemedicine
Ink signatures Online notaries
Classroom instruction Distance learning
Bricks and mortar stores Online shopping;  Amazon
High end shopping malls Target and Walmart
Movie theaters Streaming
Live entertainment, live sporting events Television and streaming
Restaurants Takeout
Running out to the store for a few items Home delivery
Conspicuous consumption Necessities, frugality
Producers of luxuries Producers of necessities, including low wage workers