Thursday, July 12, 2012

Depressions as ... well, depression.

Calling periods of falling or stagnant economic output "depressions" is, of course, a metaphor. But there's also something pretty apt about it. Depressed people often find themselves stuck in vicious cycles of destructive behaviors, continuing to engage in actions they know to be harmful and to exacerbate their condition while refusing to take simple steps that may yield improvements. So it is with economic depressions. The mechanism behind them is simple. Smith, Marx, and many before them already understood the simple idea that these are periods in which there is a buyers market, not for one specific good, but for all goods. People hoard money, and the scarcity of buyers depresses activity. It's simple and straightforward.

Perhaps the persistence of these periods is some sign of a failure to understand this mechanism. But it seems to me that this tends to underestimate the attraction of this vicious cycle. As with anyone who has ever eaten another cupcake when you knew you were already disgustingly full, or who has taken another drink when you were already quite drunk and facing a nasty hangover, there's a certain perverse delight in continuing these periods, especially if they portend symbolic suffering rather than some immediate and serious harm. For someone already feeling down, a nasty hangover is just what is necessary to allow them to wallow in pity and lament all of the other problems that they cannot change. In similar fashion, periods of depression allow those who are not seriously harmed by unemployment to feel a certain generalized discontent, and to thus feel all the more intensely negative about other things.

If you are already in a mood to feel bad--if you are of the mindset that wants to harp on all the minute things that seem wrong in your life, or if you are a malcontent pundit who wants to gain more attention for his or her particular hobbyhorse issue--then depressions are actually quite attractive. So it is with individual depression if you are a pharmaceutical company, or mass depressions if you are an employer of low wage labor. It would be downright surprising if such actors avoided acting in their self-interest and prolonging such periods. With corporate profits at an all time high, there's simply little real motivation for the business community to get excited about an end to mass unemployment. For everyone else, well, there's always a certain perverse delight in wallowing in one's own misery .

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