It has become obvious that the world economies can only be, or will soon turn, bad given the recent outbreaks of pandemic. That's the reason why various emergency economic rescue plans have been recently put forwards all over the world (notably America's US$2 trillion plan). If things are not "bad", you don't need "rescue" plan.
Why the economies will turn bad? The reason should also be obvious. Pandemic disables normal economic activities to be undertaken. For example, consumption will reduce as shopping outside is more dangerous and in some locations officially banned. Also, working from home is compulsory or at least encouraged. In a way, economic performance is about how many economic activities are undertaken. When things are active (or not), the performance is good (or bad).
Is this explanation too simple (and naive)? If you think so, perhaps I try to polish it. GDP is the total value of output in an economy. If consumption is reduced, a smaller amount of output will be made to serve the consumers. Furthermore, working from home is likely less efficient in delivering the effects (if this is not true, why don't firms encourage more works from home before the pandemic). Hence, production will decrease even if the demand is the same. All these imply a reduction in GDP, in other words, an economic bad time.
In fact, this is a typical macroeconomic way of explanation: it simply tells you which variables will change and, in what direction, when an event happens. In a way, there is nothing wrong in it. Just that, perhaps we sometimes want more than this, as an economist (or economic student).
For example, pandemic affects not only domestic activities but also trades. Global logistics does not shut down but slows down. You might have observed: sometimes the goods on shelves were sold out but they were not restocked as fast as in normal time. The reason why should also be clear. If pandemic makes working not as efficiently as before, it will not simply affect domestic but also foreign trades.
Now, if foreign trades are affected, and if we stick only to the macroeconomic view above, a contraction in foreign trades (both exports and imports decrease) may not necessarily be a negative factor to GDP, other things being equal. When exports decrease more than imports do, this is a negative factor to GDP. But when exports decrease less than imports do, this is a positive factor to GDP. Hence, other things being equal (e.g. if consumption is not reduced), fewer foreign trades will be good to the economy in the latter case!?
An economist will say "no". If she or he says "yes", why should we teach so much about the advantage of international trade? We have been taught that trades enable countries to specialize in the industry in which a country has comparative advantage. If trades are forced to slow down, the comparative advantage cannot be (fully) realized. There is a loss definitely. But how this is shown in economic figure? In GDP figures, trade contraction may even be a good news. But this is misleading as discussed above.
If foreign trade contraction may be misconceived as something good (from a pure GDP perspective), a similar misconception may also occur to domestic trades. Economic theory normally separates foreign trades from domestic trades. The former is an independent topic. The latter is not. Economists discuss market exchanges as a topic, but mainly emphasize the market structure (e.g. perfect competition, oligopoly, monopoly, etc). We rarely mention the advantages of market exchanges, including domestic trades. Then, what's the advantage of (domestic) trades? The answer is basically the same, at least partly the same: comparative advantage. While different countries have different comparative advantages, different individuals (or firms) may also have different comparative advantages. Why we are not all farmers and manufacturers at the same time? You may say: it is impossible because you don't know how to farm. Yes, you don't know but that's because you don't need to learn the skill. Someone else farm and you simply can get what is necessary for you (food) via market exchanges. It is then clear that trades enable people to specialize in what they are good at. You are not good at farming but may be good at computing. That's your comparative advantage, and so you do only computing, not farming. Through trades, both specialists can still get what they need. You can get much more food than farming yourselves while the farmers also benefit from the efficient computing technologies. Both will benefit from trade and specialization.
Thus, we can see that the benefit of domestic trade is that it enables realization of specialization and the associated gain. Are there misconceptions? In GDP, more domestic trades always increase GDP (as reflected by increases in consumption, investment or public expenditure). So, there seems to be no misconception, at least in GDP perspective. But there is still something missed. The benefit of trade is not really reflected in GDP. The productivity enhancement via specialization is hidden behind the GDP figures. In fact, there are many other economic forces hidden behind GDP or cannot be reflected in GDP. I cannot mention all these. Let me simply emphasize a point: Why are market activities important? Why should we pay so much attention to them? It is often more important to know the reasons behind, instead of simply knowing what happens (e.g. whether GDP increases or decreases).
During economic bad times, people often pay more attentions to economics. This situation is similar to healthcare: When people are healthy, they forget healthcare issue. But when people are sick, they pay more attentions to health. Now, our economy is sick. Perhaps this is also a time for us to revisit the basic economics to understand what all these mean.
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