OPTIMISM ON THE ECONOMY
09 May 2009 | By ken in Culture and FinanceCan We Believe It?
I am far from alone in my skepticism about the “optimism” being expressed about recent economic statistics. Bob Herbert in his New York Times column today noted how shallow and misleading the evidence for a recovery is, and even the lead article on the front page, subtitled “Some Economists Say Worst May Be Over,” quotes Dean Baker, co-director of the Center for Economic and Policy Research in Washington, saying, “This isn’t recovery. It’s a slowing recession.”
Clearly many, including the administration, would like us to be optimistic about a recovery because optimism (or “confidence” as it used to be called) encourages consumers and investors to reenter the market and that, in itself, contributes to a recovery. But this “optimism” seems to be done with mirrors. A slowing of the pace of decline hardly indicates a turnaround, as we have little idea how long this new slower rate will last. We could just as easily say that the recession itself is a harbinger of recovery as once we enter a recession will will have to come out of it. Right?
But people are not optimistic just because the administration or Wall Street wants them to be. We desperately want to be optimistic too — or many of us. That’s where we have to watch ourselves: believing what we want to believe.
Apart from deluding ourselves and making bad decisions, we have to watch ourselves because it introduces further divisions into out already badly divided society. We are all affected by this economic catastrophe but we are not all affected the same.
Remember that the sub-prime mortgage debacle came about because of the millions of poor Americans lured into fulfilling their dreams of home ownership or getting quick and easy cash from home equity loans. To be sure it was the reckless repackaging of those loans that touched off the crisis, and many rich or merely comfortable investors lost a lot of money when those securitized “assets” vanished. But then there were those who actually lost their homes. And those who lost their jobs and who are still unemployed — even though the rate of increasing joblessness is not increasing as fast as it was.
What we sometimes don’t know we know is how selective memory is, and how easily our wishes shape our perceptions.
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18 May 2009 | Grant Brenner Said:
I think one interesting aspect of the optimism you are noting is from the point of view of risk communication. With troubling news and events, the way information is disseminated and the impact the manner and degree of sharing of information is implemented has been studied for decades. See http://www.centerforriskcommunication.com/home.htm and/or google “risk communication”. The gist is to present a message which reduces fear, reduces rumor-mongering, and (ideally) good quality, accurate information.
However, the social psychological understanding of how human beings individually and collectively process fearful messages and assess risk and respond based on assessment of risk is also used to craft languaging in ways which may not be accurate, but which are designed to produce a more positive impact.
I think there are a few considerations of great interest pertaining to what we’ve learned from risk communication technologies as a form of applied psychology. One consideration is whether there is some wisdom to generating positive expectations – does the affect generated actually push the outcome in a more positive direction, and by whose definitions? Another is if what has been understood about social psychology and information processing under conditions of stress is being used to more effectively “wag the dog” and inadvertantly perpetuate ongoing destructive cycles.
Overall, I think we may have a tendency to appropriate empirical research findings and apply these findings with a fast turn-around, without really understanding the long-range impact.