In a piece at Bloomberg Tyler Cowen warns us not to expect a tremendous improvment in 2021 over 2020:
If you had expected 2021 to be a relief from the horrors of 2020, sorry: So far it’s looking worse. Covid indicators, including deaths, are reaching new highs. The vaccine rollout has been badly botched. A violent insurrection, cheered on by the president, reached the inner sanctum of the Capitol.
The obvious question is whether bad news comes in waves, and so far the evidence seems to indicate that it does.
Consider bad economic news, which is relatively unambiguous. With stock market returns, volatility is correlated over time, and it is higher in bear markets. To some extent the bad mood is contagious, and the bad events behind the volatility may be interlinked as well.
To be clear, the stock market has done fine lately. The latest bad news is about politics and public health, not corporate earnings. Still, the stock market is readily measurable and can offer clues about how broader social processes are connected over time — and one obvious conclusion is that volatility tends to feed upon itself, not usually in positive ways.
Much of the recent turmoil in America has been connected to the presidency of Donald Trump, and that will be ending soon. The associated volatilities, however, will not simply fade away. Trump’s ascendancy was a symptom of other social processes already gone askew. Even when Trump leaves the scene, a particular group of irresponsible men is likely to continue as a source of domestic terrorism and unrest, and they will (to the extent they need to) find new icons. This problem seems to be intensifying.
And while social media seems to have a positive effect on interpersonal relations, it is difficult to deny that it helps to organize such protests and riots. That trend seems unlikely to disappear anytime soon, and it will fuel additional volatility.
Another problem is what my colleague Bryan Caplan has labeled “the idea trap.” Social science research indicates that in troubled times people are more likely to turn to bad ideas. The distressed German economy of the 1920s and early 1930s, for example, helped to breed support for the Nazis.
To that I would add that very few of the ideas being proposed to correct present problems will materially affect them, at least not in the near term and possibly not ever. Nothing I’ve seen even scratches the surface of the corruption, dishonesty, or incompetence that afflicts many of our institutions. And some of them bear a risk of making things significantly worse.
And those are just the known unknowns. We have no idea of what the unknown unknowns may bring.