Blog Discussion - The COVID-19 Response: The challenges and promise for input-output modeling and related disciplines

Hello Fellow EEIO section members. I posted on the blog on this topic and am creating this forum topic for any discussion. I welcome your comments!

Thanks for starting this discussion about the future of EEIO modelling. As an EEIO researcher, I would like to share my viewpoint.

 On the rapid structural change, I would like to stress that the essential point is, the near-collapse of non-essential trade. This unthinkable behavioural change though forced or rather induced in the economic-system has led to the collapse of non-essential demand is both a cause of worry and reason to celebrate (reduced levels of air, light, and noise pollution, in many urban centres of the world and of course reduction in GHG emissions due to temporarily extinguished economic-activity).

Further, I would like to add that in the current COVID-shock, major industries could start producing equipment (ventilators, pharmaceuticals, etc.) because the global manufacturing was already working below its capacity due to trade-war between some powerful nations and reduced demand in others. Thus, no major structural change (no new technology was launched) happened in any economy, only the demand shifted or rather spiked in a couple of industries/sectors in very short-term. And yes, you are right such abrupt change in economic-system, probably only for a short time, may become completely opaque in the compilation of next IO tables due to the basic nature of compilation technique.

Coming to response undertaken, if maintaining social-distance via confinement to a single place becomes a norm, in the long run, it would lead to serious changes to demand function. To explain further,  if the behavioural-change of #work_from_home option becomes permanent for a major part of information-based economic activities in the long-term, it could/would have a tremendous impact on transportation systems, international tourism (travel and hotels industries), and probably, fast-fashion goods industry. The health and insurance sector would increase the prices on account of current trends to cover their expenses and prepare for future shocks (which the biodiversity and epidemiology scientists proclaim are likely to increase in future).

The far-fetching implications of such metamorphism of material-oriented demand-based economic-system (transportation, clothing, etc.) to a minuscule, local, information-based economic-system are manifold in current circumstances. On the energy front, who would fund renewable energy systems (CCS, hybrid-vehicles, solar, hydro, etc.) that have been advocated for reducing supply-chain impacts, since governments, financial institutions, and industries themselves, etc. may take a hard look on funding such endeavours (no future rise in demand) from financial-sustainability perspective. In the context of more #work_from_home, the reduced demand for commercial service centres would affect the construction sector.

In the dense urban-centres, people may still practice social-distancing due to psychological reasons thus affecting sporting or other events, which may still reduce the demand of OTC sporting goods (all supply-chains linked to China one way or other), while many may prefer to move (mostly # work_ from_home) to suburban centres to avoid the situation as seen in NYC. The reduction in the size of the community may decrease food consumption and thereby waste-generation, leading to a higher price for the delivery of such goods and cleaning services. Probably, the new information-based economic-activities may evolve to be more region-specific, while only essential and longer-duration travel would be undertaken. The need would arise for more electronic equipment especially computer-devices and web-based services. However, all such changes are more likely to follow the bottom-up approach rather than top-down policy-rule.

In such a light, certain critical questions could arise for the future of EEIO models. First, currently, most of them are based on national surveys that lead to the development of supply-use tables and thereafter IOTTs.Thereby, the primary question after CoVID event is when would the next survey be conducted, especially since these tables are compiled after 4/5 years in many nation-states. In case of non-availability of apt surveys of households for medium-term, the future development of EEIO models is likely to be based on the use of more analytical and geo-referencing (GIS, remote sensing) methods and probably the development of physical IO-based accounts may gain prominence due to balancing constraints that economic IO table poses. Second, in order to incorporate the dynamic nature of demand in such models, integration with dynamic modelling techniques, both bottom-up oriented (agent-based) and top-down (system dynamics modelling)  may acquire prominence.

Since EEIO models investigate resource productivity, along with highlighting the total impact of resource use (regional or global),  there should be more emphasis on assessments that optimize regional activities conducive within regional and global boundaries. Further, more emphasis should be laid on value-added contributed by human-labour (COVID has highlighted the need for essential service providers nurses, waste-collection services, among others), thereby EEIO models should incorporate more S-EEIO (Socio-EEIO) component, like social-LCAs. Further, more emphasis should be laid on the use of EEIO models for assessment of regional sustainability and not just supply-chains and international trade, lest the world wants to be completely at the mercy of one nation-economy for meeting its basic needs, Actually, we should be glad that our food-systems are not originating from only one nation yet. Imagine the catastrophe! 

Interesting article related to recycling supply chains being impacted

https://finance.yahoo.com/news/recycling-dwindles-supply-chains-buckling-000036982.html

Thanks for sharing the article (https://finance.yahoo.com/news/recycling-dwindles-supply-chains-buckling-000036982.html), Wes.

Referring to the shared article, this paper, https://pubs.acs.org/doi/abs/10.1021/acs.est.5b00206  (and a companion-one), presents an interesting analysis of diversification of the supply-chains of critical materials in the context of renewable energy systems using System Dynamics Modelling.