Our Fixed Income CIO Sonal Desai unveils the first insights from the new Franklin Templeton–Gallup research project on the behavioral response to the COVID-19 pandemic and implications for the recovery: we find a gross misperception of COVID-19 risk, driven by partisanship and misinformation, and a willingness to pay a significant “safety premium” that could affect future inflation.

The first round of our Franklin Templeton–Gallup Economics of Recovery Study has already yielded three powerful and surprising insights:

  1. Americans still misperceive the risks of death from COVID-19 for different age cohorts—to a shocking extent;
  2. The misperception is greater for those who identify as Democrats, and for those who rely more on social media for information; partisanship and misinformation, to misquote Thomas Dolby, are blinding us from science; and
  3. We find a sizable “safety premium” that could become a significant driver of inflation as the recovery gets underway.

Misperceptions of risk

Six months into this pandemic, Americans still dramatically misunderstand the risk of dying from COVID-19:

  • On average, Americans believe that people aged 55 and older account for just over half of total COVID-19 deaths; the actual figure is 92%.
  • Americans believe that people aged 44 and younger account for about 30% of total deaths; the actual figure is 2.7%.
  • Americans overestimate the risk of death from COVID-19 for people aged 24 and younger by a factor of 50; and they think the risk for people aged 65 and older is half of what it actually is (40% vs 80%).

These results are nothing short of stunning. Mortality data have shown from the very beginning that the COVID-19 virus age-discriminates, with deaths overwhelmingly concentrated in people who are older and suffer comorbidities. This is perhaps the only uncontroversial piece of evidence we have about this virus. Nearly all US fatalities have been among people older than 55; and yet a large number of Americans are still convinced that the risk to those younger than 55 is almost the same as to those who are older.

This misperception translates directly into a degree of fear for one’s health that for most people vastly exceeds the actual risk: we find that the share of people who are very worried or somewhat worried of suffering serious health consequences should they contract COVID-19 is almost identical across all age brackets between 25 and 64 years old, and it’s not far below the share for people 65 and older.

The discrepancy with the actual mortality data is staggering: for people aged 18-24, the share of those worried about serious health consequences is 400 times higher than the share of total COVID deaths; for those age 25-34 it is 90 times higher. The chart below truly is worth a thousand words: