Modelling the Economics of the New Normal: A Discussion Paper on Methodology and Macro Modelling for a Post-Coronavirus World

I attempt to envision a post-pandemic world in which no vaccine is in place nor herd immunity is achieved, leaving social distancing a persistent feature of the economy that is slowly waking up from its stasis. General trends and some facts from the pandemic motivate initial impressions and inspire the subsequent analysis. Macro models of the COVID-19 global event are surveyed for insights confirming a world in a recession like no other. Methodological considerations on economic vision, goals, and models provide a relevant starting point for envisioning the new normal anchored on resilience and values the protection of life. This paper is necessarily speculative and eclectic by nature and intent; it serves the role of setting the foundations for a proposed research programme dedicated to new economic thinking which I conjecture to be necessary for the process of reimagining the economy. I argue that mainstream macro models, while useful, unnecessarily limit the visioning exercise. Old medicine may not cure new problems, but new cures need testing. I study a within-the-mainstream approach that nevertheless recognises agent heterogeneity, social interactions, the role of social norms, government and institutions in influencing behaviour in complex and chaotic systems, and the presence of multiple equilibria and path dependency. These features further recall the Classical tradition to inspire a resilient path forward into the new normal.