Friday, June 20, 2008

Mark Thoma explains why people are unhappy

For the past four or five years, I have gone to a meeting that the CFO of DC convenes to get views on the state of the area real estate market. At the most recent of these meetings, a hack "economist" declared that people were (I am paraphrasing here) pessimistic without reason about the economy.

Neil Irwin in The Washington Post had a similar complaint, and argued that people's pessimism arose from the fact that the indicators they see on a regular basis, such as gas prices, have been alarming to them.

But I think Mark Thoma has the real answer:

Part of the problem is the presumption in the question, which has been around for several years now and is basically "why are people so gloomy when the economy is doing so well?" If you ask instead, "why are people so gloomy when the economy has all these problems, reduced economic security, stagnant real wages, rising health care costs, falling home values, rising college costs, rising food costs, loss of employer based retirement programs, rising energy costs, worries about the future, etc., etc.," there's really no mystery.

I think both the "economist" at the meeting and the Washington Post reporter have limited capacity to think about what it must be like to be the median income household now. The median income household has now had (at best) many years of stagnant living conditions and worsening economic security.


Uncle Billy said...

Lafayette, as usual, has some entertaining and thoughtful comments on that post.

Thoma forgot to mention that people have been reading about cataclysmic events in the financial world, and about the gods behaving in ways they only vaguely understand.

Contstant reference to the great depression, talk of global credit seizures, milk and bread and gas prices "skyrocketing." I think the average person just feels the same fear that a soldier fears when he never doesn't know if the next bullet will be for him. And this wears on the soldier, day after day.

Plus there was the synthetic wealth factor for many -- "my house was worth a million dollars." Gone.

And then there's the internet. Issues are amplified and sent around the country at light speed now. Eloquent crackpots often have larger readerships than level-headed bloggers.

Lastly, some of the gloom is manufactured. We now understand how the bad guys pump and dump stocks using the media. Seems as though some are able to pump and dump entire economies. Fear and greed. These are the big money-makers. We've gone through a really nasty rise in greed profits and now it's fear time.

Anonymous said...

In case you missed it

(via economists view)

"The Economics Of Nice Folks"

It's so nice to see that people are looking more and more beyond the numbers.

Anonymous said...

My column yesterday prompted more emails from readers than any other article I have written. I usually get 10 or 20 letters or emails. I got hundreds about this one and they’re still coming. I expected to get a few from Republicans praising me (they would ignore the positive things I say about Democrats in general and Obama in particular) and a few from Democrats attacking me (these would be spluttering and furious: “are you kidding me? are you kidding me?”, and so on). And so I did. But these were outnumbered–vastly outnumbered–by emails from ex- or wavering Democrats who say they feel disappointed or betrayed by the party’s spokesmen and advocates. Who knew this strand of opinion even existed?As I said, I had already written about that. On the more recent post responding to the Crook article, I also got an unusual number of comments, mostly saying I was wrong, but that was useful. From the volume and passionate nature of the responses, I think there's something here. But what is it, exactly?

Here's Megan McArdle on the same theme:

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