| The Ottawa Citizen
Saturday, January 24 2009, By Dan Gardner. ©The Ottawa Citizen. |
||
|
The gloom gets gloomier with each passing day. 'The slump is the longest, if not the deepest, since the Great Depression," notes the cover story in Time. "Traumatized by layoffs ... U.S. consumers have fallen into their deepest funk in years. 'Never in my adult life have I heard more deep-seated feelings of concern,' says Howard Allen, retired chairman of Southern California Edison. 'Many, many business leaders share this lack of confidence and recognize that we are in real economic trouble.' Says University of Michigan economist Paul McCracken: 'This is more than just a recession in the conventional sense. What has happened has put the fear of God into people.'" Depressing stuff. Then, in the Vancouver Sun, I read a story about Stephen Roach, one of the most respected economists on Wall Street, who warned that the massive losses on stock markets have produced a "negative wealth effect" that may "plunge the North American economy into its worst recession since the 1930s." Worried yet? Of course, you are. That's the new culture we live in, a "culture of recession," as a writer in Toronto Life called it. It is "a culture that has generated feelings of sheer panic for some, extreme despair for others, and uncertainty and unrest for just about everyone else." Like I said, grim times. I'm glad they're over. The first quotation comes from an article published January 1992. The second dates from March 2001. The third appeared in March 1993. Writing in the Globe and Mail a few weeks ago, novelist Douglas Coupland discussed what he called "gloomageddon." (If nothing else, Coupland is a fabulous neologist.) "I spoke with friends decades older than me and I asked them what it felt like to have a mortgage in the 1970s and early 1980s, and they said it obviously didn't feel too good. And then I asked them how scary it felt in general to weather the early 1970s financial woes and all of the subsequent cyclical downswings since then. The unanimous agreement seems to be that, while previous downswings were no cakewalk, what's happening at the end of 2008 is weirder, darker and spookier than anything that's come before. It obsesses them and eats up a huge slice of their everyday imaginative lives in a way previous recessions never did."
|
They aren't alone. Plenty of people are certain the current crisis is "weirder, darker, and spookier than anything that's come before." But Coupland and his friends made a serious mistake: They assumed that how people remember feeling during past recessions is a complete and accurate reflection of how they actually felt. This assumption is based in part on the popular belief that memory is accurate and unchanging, and therefore reliable. But that belief is wrong. Memory is organic. Our recollections grow and evolve, wither and die, in response to new information, circumstances, and psychological needs. Never change? Our memories never stop changing. So if you search your memory of, say, 1988 and you cannot recall worrying about economic collapse, that is not conclusive evidence that you did not worry about economic collapse in 1988. In fact, there's a good chance you did worry about economic collapse that year, whether you remember it or not: The Black Monday stock market crash happened in October 1987, and a No. 1 New York Times best-seller in 1988 was Ravi Batra's The Great Depression of 1990. No memory of that book? That's my point. Beyond the general unreliability of memory, there's a more specific reason to doubt the perception that we are more afraid than ever. Psychologists call it "hindsight bias." I've written about it before and will again because it is so critical to how we think about the day's events. Imagine it's 1988. People are talking about this book, The Great Depression of 1990. So I ask you a question: How likely is a Great Depression in the 1990s? You think for a moment and make a guess. Twenty-one years pass. It's 2009. And I have another question for you.
|
Think back to 1988, I say. At that time, how likely did you think it was that there would be a Great Depression in the 1990s? If our memories were accurate and unchanging, your two answers would be identical. But our memories don't work that way. And I can say with great confidence that your two answers will be quite different. And in a predictable way. Your second answer will be much lower than your first. Very simply, knowledge of how events turn out changes our sense of how likely they were to turn out that way. That's hindsight bias. It's powerful. And persistent. In experiments, psychologists have found that even when people are told to not let their knowledge of what actually happened influence their answers, it does. This is a key source of nostalgia for the past. It's also tends to make the present look scarier than it is because, standing here in the present looking into the inky future, you see nothing but uncertainty. All sorts of awful things could happen. But the past? We know what did and didn't happen. There's no uncertainty. Drained of uncertainty, the past always feels less frightening. My point here is not that the pessimists are necessarily wrong about the economy today. It's that when we compare the present with the past to judge how bad things are now, we must turn to objective evidence-like statistics and written statements. Our feelings and memories simply aren't reliable. You can contact Dan Gardner at the Ottawa Citizen. |
|
Copyright © 2005 Dan Gardner |