Business

Ebola fears, rational or irrational, could cause an economic fallout

Workers on Friday prepared to disinfect North Belton Middle School in Belton, Texas. A Texas school district has temporarily closed three of its campuses after a family of four, including two students from the district, traveled on the same flight as a nurse who has since been diagnosed with Ebola.
Workers on Friday prepared to disinfect North Belton Middle School in Belton, Texas. A Texas school district has temporarily closed three of its campuses after a family of four, including two students from the district, traveled on the same flight as a nurse who has since been diagnosed with Ebola. The Associated Press

Stephanie Kelton is supposed to fly to Dallas next week. She already has her plane ticket. But she’s seriously thinking of driving instead.

“I don’t want to be irrational, but at the same time, I’m not entirely comfortable with the idea of getting in an airplane right now,” said the economics department chair at the University of Missouri-Kansas City. “I’m trying to decide if I want to bite the bullet and buy my peace of mind instead.”

In a Harris Poll/HealthDay survey of Americans this month, nearly one-fourth of the respondents said they might change their holiday or business travel plans because of Ebola fears.

Kelton is among the millions of Americans who have begun making economic decisions with Ebola in mind. Though driving instead of flying might actually cost her more, many others are instead choosing to spend less, canceling planned trips or other spending.

There have been only three cases of Ebola diagnosed in a nation of 310 million people, but economists are concerned that the actual costs of treating the victims and containing the disease will be far outstripped by the cost of fear that slows the economy.

“For me, as an economist, the biggest risk to the nation is not the disease itself, but the reduced spending a panic might result in,” said Frank Lenk, chief economist at the Mid-America Regional Council.

The growing national anxiety over Ebola has been driven in part by the stumbling response to the first case in Dallas by the hospital involved and the Centers for Disease Control and Prevention, a daily barrage of sometimes politically driven media coverage, and daily news events.

Friday in Belton, Texas, three schools temporarily closed for disinfecting because two students had been on the same flight as a nurse who since has been diagnosed with Ebola.

Also on Friday, reporting “an extreme abundance of caution,” Carnival Cruise Lines said a cruise ship passenger, a lab supervisor from the Dallas hospital that treated the Ebola patient who died, was in isolation on a ship near Belize. The woman had shown no signs of disease and was considered “very low risk,” but the cruise line was intent on minimizing any risk to other guests or crew.

President Barack Obama sought to allay the fears over Ebola on Thursday, saying, “I understand people are scared. I do want everyone to understand it remains a very difficult thing to catch. The risks involved remain extremely low for ordinary folks.”

On Friday he named an Ebola “czar” to better manage the government’s response to the deadly virus. Ron Klain, a former chief of staff for vice presidents Al Gore and Joe Biden, was chosen for his reputation for handling high-stakes problems.

The direct cost of the deadly disease, of course, will be to victims, hospitals, doctors and nurses. The University of Kansas Hospital had a preview this week of the higher direct care costs when it ramped up procedures to care for a possible Ebola patient who was determined within two days to not have Ebola.

Other costs will weigh on those trying to contain the disease by tracking down people who have had contact with victims or their health care workers.

But given that a minuscule percentage of Americans have actual contact with the infectious disease, most will be more affected by a possible economic slowdown. Lenk said a reduction in consumer spending caused by fear “could cause the rate of recovery to slow, stop or even reverse, depending on the amount of spending withdrawn.”

Some economists said Ebola fears, in part, dragged the stock market down this week. Airline stocks in particular have fallen this month.

The Global Business Travel Association, an advocacy group, said its Oct. 13-15 survey of 421 corporate travel managers found that nearly one in five said Ebola concerns had “some to a great deal of impact” so far.

The World Bank has estimated a conservative fiscal impact of $350 million for the three hard-hit West African countries of Liberia, Sierra Leone and Guinea and “the largest costs are not those associated with containing or treating the virus,” said Lindsey Piegza, chief economist at Sterne Agee.

She wrote in a newsletter that the big financial impact of a disease outbreak often stems from “panic or aversion behaviors.” In other words, people take costly but unneeded steps to shield themselves from the highly unlikely possibility they would contract the disease.

In previous infectious disease outbreaks in Africa and Asia, 90 percent of the total economic impact of the epidemics was from such “behavioral effects” as halted tourism and reduced spending in restaurants and hotels.

“I don’t think a return to recession is likely, but there could be some slowing in the rate of economic growth if a true panic emerges from these first U.S. encounters with the disease,” Lenk said.

He added that he hopes “public health officials will soon be able to provide enough positive information to reduce public fears.”

The hunger for calming news is apparent. Across the country, nurses, emergency responders and flight attendants are among particular groups that have expressed worries about their training or exposure to infectious disease. This month at LaGuardia Airport in New York, about 200 airplane cabin cleaners failed to report for their shifts, saying they feared working without better protective gear.

Psychology of fear

Two-thirds of the public at large expressed fear of an Ebola epidemic in the United States, according to a Washington Post/ABC News poll this week. If Ebola stories stay prominent in the news, economists and academic researchers expect the psychology of fear to take greater hold.

Jessica Li, an assistant professor of marketing at the University of Kansas School of Business, said that fits with her academic research on how people react to fear of disease transmission. In short, they pull in.

Li’s most recent experiment analyzed “perceptions of pathogen transmission and how that affects decisions about familiar and unfamiliar food.” The results showed that when people fear disease transmission, they find the familiar more appealing.

For the economy at large, that means not taking a trip to an unfamiliar place, not visiting a new restaurant or not sampling foreign food. It means staying home and opening a can of chicken noodle soup instead.

Li said some of that reaction may be fueled by ignorance about how the disease is transmitted. Ebola contagion requires direct contact with bodily fluids of a person who has the disease.

There’s also plenty of research on the psychology of disease avoidance. Li said researchers know that people who are concerned about disease generally don’t want to accumulate new things — they want to get rid of the things they have, and they perceive unfamiliar things more negatively.

Those behaviors could dampen consumer spending in the important November and December retail months.

Chalk those tendencies up to evolutionary decision-making. Throughout history, people have survived by choosing to do their best to avoid disease. A decision to isolate themselves may turn out to have been an overreacting error, Li said, but “it’s the less costly error to make” in the long run.

Still, fears about using close-quarter public transportation, especially airplanes, got a boost this week when the Centers for Disease Control and Prevention said it wanted to contact every passenger who had been on a Cleveland-to-Dallas flight taken by a nurse who is now known to have been infected when caring for the Dallas Ebola patient.

As the American public becomes better informed about Ebola and its transmission, some fears may ease. But Americans also may need a better understanding of geography.

A caller to The Star expressed concern about riding in Kansas City area cabs or airport shuttle vans because “the drivers are from Somalia.” Told that Somalia isn’t one of the countries plagued by Ebola, he persisted that, well, they’re from Africa.

Neither was he allayed by the fact that the drivers probably have been in the United States for far longer than the Ebola incubation period.

To reach Diane Stafford, call 816-234-4359 or send email to stafford@kcstar.com.

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