Americans Haven’t Been This Depressed About the Economy for Ages and Ages

Commentaries on economics and technology.
Sept. 23 2011 1:18 PM

Narrative Over Numbers

It has been a long time since Americans have been this depressed about the economy.

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This is a much bigger downswing than was recorded in the overall consumer-confidence indexes. The decline occurred over the better part of a decade, as we began to see the end of debt-driven overexpansion, and accelerated with the latest debt crisis.

The timing and substance of these consumer-survey results suggest that our fundamental outlook about the economy, at the level of the average person, is closely bound up with stories of excessive borrowing, loss of governmental and personal responsibility, and a sense that matters are beyond control. That kind of loss of confidence may well last for years. That said, the economic outlook can never be fully analyzed with conventional statistical models, for it may hinge on something that such models do not include: replacing one narrative—currently a tale of out-of-control debt—with a more inspiring story.

This article is also published at Project Syndicate.

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Robert Shiller, professor of economics at Yale University and chief economist at MacroMarkets LLC, is co-author, with George Akerlof, of Animal Spirits: How Human Psychology Drives the Economy and Why It Matters for Global Capitalism.