Rushing to stock up on toilet paper before it vanished from the supermarket aisle, stashing cash under the mattress, purchasing a puppy or perhaps planting a vegetable patch – the COVID-19 pandemic has triggered some interesting and unusual changes in our behaviour.
Understanding the psychology behind economic decision-making, and how and why a pandemic might trigger responses such as hoarding, is the focus of a new University of Technology Sydney (UTS) paper.
The study, authored by behavioural scientist Professor Michelle Baddeley, examines a range of explanations for hoarding and other behaviour changes observed during the pandemic.
“Understanding these economic, social and psychological responses to COVID-19 can help governments and policymakers adapt their policies to limit negative impacts, and nudge us towards better health and economic outcomes,” Prof. Baddeley said.
Hoarding behaviour, where people collect or accumulate things such as money or food in excess of their immediate needs, can lead to shortages, or in the case of hoarding cash, have negative impacts on the economy.
“In economics, hoarding is often explored in the context of savings,” Prof. Baddeley explained. “When consumer confidence is down, spending drops and households increase their savings if they can, because they expect bad times ahead.
“Fear and anxiety also have an impact on financial markets. The VIX ‘fear’ index of financial market volatility saw a dramatic 564 per cent increase between November 2019 and March 2020, as investors rushed to move their money into ‘safe haven’ investments such as bonds.”
While shifts in savings and investments in the face of a pandemic might make economic sense, the hoarding of toilet paper, which also occurred across the globe, was more difficult to explain in traditional economic terms, Prof. Baddeley said.
“Evolved instincts dominate in stressful situations, as a response to panic and anxiety,” she said.
“During times of stress and deprivation, not only people but also many animals show a propensity to hoard.”
Another instinct that can come to the fore, particularly in times of stress, is the desire to follow the herd.
“Our propensity to follow others is complex. Some of our reasons for herding are well-reasoned. Herding can be a type of heuristic: a decision-making shortcut that saves us time and cognitive effort,” she explained.
“When other people’s choices might be a useful source of information, we use a herding heuristic and follow them because we believe they have good reasons for their actions. We might choose to eat at a busy restaurant because we assume the other diners know it is a good place to eat.
“However, numerous experiments from social psychology also show that we can be blindly susceptible to the influence of others.
“So, when we see others rushing to the shops to buy toilet paper, we fear missing out and follow the herd. It then becomes a self-fulfilling prophesy.”
Following some of the rules created to reduce the spread of coronavirus also makes it important to predict behaviour patterns.
“Most people are generally law abiding but they might not wear a mask if they think it makes them look like a bit of a nerd, or overanxious,” she said.
“If there is a rule saying you have to wear a mask, this gives people guidance and clarity, and it stops them worrying about what others think.
“So, the normative power of rules is very important. Behavioural insights and nudges can then support these rules and policies, to help governments and business prepare for second waves, future pandemics or other global crises.”
Were you a hoarder during the early days of the crisis? Do you follow the herd in difficult situations?
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