Marcus Evans Group | Worldwide Headquarters | American Offices | Latin America | European Offices | African / Asian Offices

Crunch time: how to deal with grim economic news

How worried should we really be about our global financial security, asks Oliver Burkeman

The last few weeks have been truly terrible ones for the financial markets. But that’s just another way of saying they have been excellent weeks for the British blog Brokers With Hands On Their Faces, and its American cousin Sad Guys On Trading Floors, both of which exist to chronicle the news media’s chronic overuse of stock pictures and video footage of stressed-looking men in blue shirts or jackets, standing in front of impossibly complex charts on plasma monitors, their hands on their foreheads, over their mouths, or under their chins, looking stricken or defeated or simply numb. Very occasionally it’s not a man, and slightly less occasionally the shirt isn’t blue. But you undoubtedly recognise the cliche: Sad-Looking Hands-On-Face Guy has become the icon of our era of gnawing financial anxiety, the blue-shirt-wearing omen of our economic doom.

The overuse of the Sad Broker image is doubtless partly down to the unimaginativeness of journalists. But it also illustrates how hard it is to illustrate the impact of awful macroeconomic news in any other way. Of course, the eventual effects of such news – a lost job, a vanishing pension, cutbacks to social services – are intensely personal, and frequently traumatising. But for most people, most of the time, seeing or hearing any given headline about “economies in crisis” or “markets in turmoil” prompts a nebulous, hard-to-categorise kind of emotional reaction, somewhere between worry and bafflement, with a dash of frustration thrown in. Even if you’re sufficiently financially savvy to understand what’s going on (and sources close to the author of this article confirm that he is not) it’s essentially impossible to gauge how panicked you should be. Reporters describe economic ructions almost exclusively using the language of human emotions: markets exude “panic”, behave “anxiously”, and “lose confidence” in politicians, while investors – which commonly means big institutions, not individuals – are “gripped by fear”. But for actual humans, knowing how to react is decidedly less clear.

The situation is rendered more confusing thanks to the fact that we tend to rely on experts in economics to tell us what to think about matters that are ultimately the terrain of psychology. (Or psychiatry: if “the markets” really were a person, it would require urgent treatment for bipolar disorder, panic attacks, multiple personality disorder and a host of other serious conditions.) As John Maynard Keynes long ago recognised, our attempts to explain economic life in terms of individuals making rational calculations ultimately bump up against the reality that our deepest motivations are an unpredictable, non-rational matter of “animal spirits”. “Only a little more than an expedition to the South Pole,” he wrote, are our economic activities “based on an exact calculation of benefits to come.” Neither our optimism nor our pessimism, as expressed in the movements of the stock market, necessarily has any good reason behind it. Trust nobody, in other words, who claims to know for certain the underlying reason for any given outburst of market panic – because nobody ever could.

One notion prevalent in some corners of popular psychology is that the best response to this predicament is to avoid consuming bad economic news altogether. If there’s nothing you can do about what’s happening, why bother pointlessly upsetting yourself? Proponents of this viewpoint, who apply it not only to financial headlines but to humanitarian disasters as well, like to quip that CNN stands for “Constant Negative News”. (They suggest, as an alternative, consulting certain websites dedicated exclusively to upbeat and inspiring news stories, but if you visit those sites you’ll find they’re apt to make you want to stab yourself in the face at their tweeness – a stabbing that, naturally, they would never report.) Even the data-hungry behavioural economist Dan Ariely confessed, earlier in the current financial crisis, that he had deliberately locked himself out of the website he used to access his retirement account by entering the password wrongly three times, so he wouldn’t have to expose himself to news of its tumbling value.

Unsurprisingly, starving yourself of news is not a strategy you’ll find many journalists endorsing, and in any case it smacks of a foolishly head-in-the-sand attitude. But the suggestion does underline how bad economic news is such perfect fodder for worry and anxiety. For a start, it’s sufficiently complex that most of the usual advice for dealing with worry doesn’t seem to apply. The ancient Stoics, and many modern psychologists, recommend defusing the power of worry by calmly working out what the worst-case scenario might really entail – but who could ever discern, in any detail, what the worst-case outcome of a double-dip recession and a sovereign debt crisis might really be? The other recurring piece of advice is to turn worry into action by doing something to address the situation. But what could any one person really do? Ariely is not the only psychologist to compare the public’s response to “market panic” headlines to that of the dogs in the 1960s experiments that established the phenomenon of “learned helplessness“. Dogs that are given electric shocks over which they have no control soon learn not to try to escape the pain, even when it becomes easy to do so. Instead, they exhibit the symptoms of chronic depression. Is something similar happening when a link between economic crisis and our own actions seems impossible to trace, and so we sink into a passive, resigned gloom?

Helplessness also feeds fear, argues Pamela Rutledge, an American psychologist who specialises in studying the effects of media. “There’s little more frightening than feeling we cannot control our own destiny – that our future wellbeing is out of our hands.” And even if we don’t give up in resignation, like electrocuted dogs, the main way we have of trying to regain a feeling of control can be an acutely self-defeating one: we consume more information. “We pay attention to news and other media,” as Rutledge puts it, “in order to find some certainty and make some sense out of the whole mess to manage the fear.” Unfortunately, if the sources to which we turn for that information are full of further anxiety-inducing headlines, it’s an antidote that will make the original condition worse.

Why do we persist in feeling so compelled to engage with stressful information when it so often just makes us feel bad? One intriguing hypothesis comes from the evolutionary psychologist Deirdre Barrett, a proponent of the concept of “supernormal stimuli“. Evolutionary psychologists are hardwired to try to explain all human life in terms of natural selection, so scepticism is advisable, but Barrett’s work is thought-provoking at the very least. She elaborates on the work of the Dutch biologist Niko Tinbergen, who showed how some animals started behaving very strangely in the presence of certain man-made items: geese, for example, will abandon their own eggs in favour of volleyballs painted with an exaggeratedly lurid version of goose-egg colouring. Male stickleback fish, who respond with hostility to the red underbellies of rival male sticklebacks, will respond even more fiercely to bright red artificial objects, even when they’re completely un-fish-like. Their evolved instincts – to nurture their eggs, or attack fellow fish – were led astray by Tinbergen’s artificial interventions.

Human instincts, Barrett argues, might be led astray in similar ways. Pornography is one obvious example of a supernormal stimulus, since looking at it excites sexual instincts while completely failing to help propagate the species. But bad news headlines fit the thesis, too. In the prehistoric context in which our instincts evolved, millennia before mass media, the instinct to find horrifying events compelling would have been a matter of life and death, since such news would almost always have direct and immediate relevance for our personal safety. These days, that’s no longer the case: most events in the news don’t affect us personally at all, while many others, including the present meltdown, are sufficiently abstract to make the threat to personal safety impossible to calculate. But the instinct persists. (Evolutionary psychologists have used a similar argument to explain the compulsion towards “rubbernecking” at the scene of car accidents.) “Instincts arose to call our attention to rare necessities, but now we use them to produce ubiquitous attention-grabbers,” Barrett has written. Still, “humans have one stupendous advantage over Tinbergen’s birds – a giant brain. This gives us the unique ability to exercise self-control, override instincts that lead us astray, and extricate ourselves from civilisation’s gaudy traps.”

Well, we can hope. And even if the draw we feel towards frightening news proves too deep-seated to uproot, there’s a silver lining when its subject matter is macroeconomic woes. This is that, broadly speaking – and with many exceptions – economic downturns tend to affect us to a generally similar degree as our immediate friends and colleagues. And if there’s one finding from the “science of happiness” that has proven itself impregnable, it is that our attitudes towards money are irredeemably relative. One famous Harvard study demonstrated that many people would rather receive a smaller absolute salary – ,000, rather than 0,000, in the experiment – so long as it meant that others around them would receive significantly less than them, rather than significantly more. And research by the economist Andrew Clark reached the uncomfortable conclusion that losing one’s job is less emotionally distressing if you live in an area of high unemployment, or if your husband or wife is already unemployed.

“So in a world in which just about all of us have seen our retirement savings and home values plummet,” observed the University of California psychologist Sonja Lyubomirsky, writing in the New York Times in the aftermath of the financial traumas of 2008, “it’s no wonder that we all feel surprisingly OK.” Except when our most basic needs – for food, shelter and suchlike – are threatened, “we care more about social comparison, status and rank than about the absolute value of our bank accounts or reputations.” Lyubomirsky adds today, though, that this effect is most pronounced when the slide into recession is steady and gradual. By contrast, when the news is full of day-to-day lurches towards disaster, fostering a sense of constant turmoil, the headlines can outpace “hedonic adaptation” – our natural tendency to acclimatise to our circumstances, which blunts their emotional impact. When every day brings a new shock, acclimatisation can’t kick in.

Ultimately, harsh though it sounds to say it, the most fruitful approach to global financial insecurity is probably to try to embrace it. From a certain perspective, total insecurity is the fundamental condition of our lives the whole of the time anyway; panicky headlines are simply an example of that truth breaking through our vigorous and normally successful efforts to avoid confronting reality. (Helen Keller’s fridge-magnet wisdom is highly relevant here: “Security is mostly a superstition. It does not exist in nature, nor do the children of men as a whole experience it. Avoiding danger is no safer in the long run than outright exposure.”) Our fierce commitment to eradicating feelings of uncertainty has been blamed, in various psychological studies, for everything from dangerous risk-taking among climbers on Mount Everest to extreme political opinions. Yet as the 1960s pop-philosopher Alan Watts was fond of pointing out, we would be hugely disappointed were we actually to achieve unadulterated certainty that we think we crave. Total certainty about the future would constitute a kind of death.

In her surprisingly profound book Embracing Uncertainty, the self-help writer Susan Jeffers, author of Feel The Fear And Do It Anyway, recommends a thought experiment: consider how you would feel if you knew, beyond doubt, exactly how your life would unfold, and when and how you would die. “Would you really want to know?” she asks. “I don’t think you would. I think your advance knowledge of the bad stuff, and there’s always bad stuff, would make you a nervous wreck.” One might respond that best of all would be a life full of surprises but without the wearying, helplessness-inducing anxiety of things like double-dip recessions and sovereign debt crises. But high points only have any meaning in contrast to low points. And in any case, those stress-inducing headlines aren’t going anywhere; plugging your ears and scrunching shut your eyes is no way to respond. And how happy could you really be in your news-free bubble, knowing that somewhere, right now, a sad guy on a trading floor is clutching his forehead in his hands, sweat dripping from the armpits of his crumpled blue shirt? © Guardian News & Media Limited 2011 | Use of this content is subject to our Terms & Conditions | More Feeds