
Professor Ivan Robertson
I’d like to welcome back Professor Ivan Robertson who joins us again to share his thoughts and expert opinion this time on the looming recession. Please feel free to leave Ivan any comments and I’ll be sure to pass them on.
According to figures released last week, the number of people out of work in the UK soared in the three months to August by 164,000 compared to the previous quarter – the biggest rise for 17 years. This is a clear signal that the economic downturn is going to be painful for many people. The risks to the well-being of people who are actually losing their jobs are obvious and these figures also do little to lift the spirits or confidence of people who remain in employment, but are worried about the future.
All political parties seem to take the view that the economy needs to be stimulated so that people will continue to spend, but are less consensual about the actual method to use to provide people with more money to spend. Gordon Brown and Alistair Darling want to borrow the money, but the Conservatives, who have been making political capital from the level of debt that the country has incurred under Labour, oppose this move in favour of what they describe as funded tax cuts.
Choosing the right economic models and methods for getting out of trouble is, however, only one of the challenges that we face. A more fundamental, albeit related, issue is that of confidence. This is an area where there seems to be a reasonable level of agreement amongst political parties, experts and analysts – that a lack of confidence has been one of the key factors in causing and accelerating the downturn and that it will also be central to recovery. Of course, when people are worried that things will get worse still they are reluctant to spend money and the economy stalls – the hope is that the recent dramatic interest rate cuts will go some way to restoring confidence and therefore spending… but this is not the full story.
As well as being an economic concept, confidence is also a psychological one. It is an idea that has been extensively researched and written about in the field of Positive Psychology. I took a look at the latest newsletter from the newly formed International Association for Positive Psychology (IAPP) and I think their perspective sheds some light on the situation many people find themselves in. Ed Diener (one of the founders of modern positive psychology) considers recent books on ‘happiness’ and asks, “Do these books have any useful suggestions for people to follow in these scary economic times?” It turns out they do and I’d like to share a couple of insights with you below.
Diener points us to Dan Gilbert’s book, “Stumbling on Happiness” which talks about the “focusing illusion.” The idea is that our attention is like a spotlight and can be focused intensely on a single topic or widened to encompass many things. Right now, we should take care not to focus our attention exclusively on the economic crisis and the problems it will / may create for us. Instead, we should widen our focus and continue to recognise the variety of other factors that bring pleasure and meaning to our lives…and which will continue to do so regardless of the economic conditions. For example, our relationships, engaging work and our personal passions such as music, books or sport.
Gilbert has also conducted research on “affective forecasting” which suggests that people commonly underestimate their ability to adapt to new conditions. So, yes – the economic crisis may well harm our happiness, but those who cope best are able to combat these thoughts about feeling bad in the future with the knowledge that they will probably adapt rather well to the adversity. Add a healthy dose of optimism to the mix and such people tend to generate the levels of confidence required to get through the tough times.
Ed Diener points to several other lessons from the ‘Happiness’ literature to help us cope psychologically with the credit crunch, but I’m running out of space in this post and threatening to break my ‘one page rule’. So, with Cary’s permission, I will summarise some more of these insights for you later this week.