The Year of Living Gloomily
If the FDA regulated the media, it would require all stories about the economy to carry this warning: "Dizziness and pangs of existential angst may result. Do not read if you suffer from gloominess or are prone to bouts of anxiety. If you are near retirement age or work in the auto industry, consult with a physician before reading."
Yes, things out there are bad, really bad, and they're only going to get worse. Americans, we're told, are retrenching. We're eating out less, forsaking vacations and gift-giving and even that big New Year's Eve splurge, though we are apparently spending more -- lots more! -- on guns, booze and psychics. Crime rates are spiking, or soon will. We're hocking our jewelry and even our hair; we're donating our eggs; we're signing up as "lab rats." We're "ransacking our closets," as USA Today breathlessly put it, in hopes of finding something -- anything -- to sell on eBay.
All because of the recession.
I'm sure some of these stories are true, or true enough to satisfy an editor somewhere, but there's something else going on here: It's what psychologists call "confirmation bias." That's the human tendency to seek out only facts that fit what we already know to be true while downplaying or ignoring contradictory evidence. As Mark Twain is said to have quipped, "To a man with a hammer, everything looks like a nail." To a media covering a recession, everything looks like collateral damage. It's the flip side of irrational exuberance: irrational despondency.
No, I'm not blaming the media for the recession, but the fact is that news about the economy matters more than, say, news about the weather. A newspaper story about a hurricane doesn't alter the hurricane's path. But negative stories about the economy (even untrue ones) can erode consumer confidence, and two-thirds of our economy is driven by consumer spending.
A few years ago, Mark Doms of the Federal Reserve Bank of San Francisco and Norman Morin of the Board of Governors of the Federal Reserve System created an "R-word Index." They tracked how often key words and phrases, such as "recession" and "economic slowdown," appeared in the headlines or first paragraphs of news stories. They then compared the results with consumer confidence and found "a strong correlation between the newspaper-based indexes and various measures of consumer sentiment."
Their findings suggest that a sort of vicious cycle can take hold. The media reports bad economic news and gloomy forecasts. Consumers respond by hunkering down and closing their wallets. The media dutifully reports that consumers are hunkering down and closing their wallets, prompting consumers to hunker down even more, which the media reports. Consumers respond by . . . .
People have always been prone to confirmation bias, but the Internet amplifies the phenomenon since we need not look far to confirm our particular bias. It's always a click away.
So if the media report good news about the economy, does a converse, positive cycle take hold? Not necessarily. Though many of us blame the media for reporting only bad news, the truth is that we're all suckers for gloom and doom. Studies have consistently found that we pay more attention to negative information (whatever the subject) than to positive information. "The brain devotes more attention to anything that appears threatening," says James Breckenridge, a professor of psychology at Stanford University. Negative information is more contagious and "stickier" than positive information. It spreads more quickly and is more difficult to dislodge once it takes hold.
Not only do we pay more attention to negative news, we also give it more credibility. Studies have found that people consistently rate a story about a politician involved in, say, a sex scandal as "more credible" than a story about how that same politician champions a worthy cause.
Thus most urban legends are tales of woe and fear, not of inspiration. A case in point is the widely held belief that after the 1929 stock market crash, there was an epidemic of dejected Wall Street brokers jumping to their deaths from tall buildings. There wasn't. But it fits the narrative, so we believe it.
It's not only the media that succumb to the twin dangers of negativity and confirmation bias. Think about the last time you got together with friends and the subject of the economy came up. Were all of the stories shared negative ones? Would you have dared to suggest that you were doing okay financially?