Monday, March 09, 2009

Gerard O'Neill Psychology of Recession and Recovery

Gerard O'Neill gave a superb talk on the current economic climate in the Geary Institute last Monday.

Full details of his talk are available below. From a research perspective, it reinforced to me the need to more fully understand whats happening with consumption. The view among many in the audience is that precautionary saving and some form of ricardian equivalence (saving now for future tax increases) were driving increased saving even among those with secure public sector positions. Others argued that perhaps no jobs feel secure now. Another potential reason for increased saving among those who have not seen an income decrease is reference effects, with the need to purchase conspicuous items being a lot lower and perhaps even seen as gaudy among the economically secure given the trouble that others are in.

Of huge importance to Gerard's talk was the role of optimism in conditioning economic recovery. This is a theme recurring across many different strands of Irish thinking at present. Whether such optimism can be harnessed to generate self-fulfilling improvement is a big question.


Alan Fernihough said...

It would be worthwhile knowing how much (if any) of this increase in saving is driven by people substituting investment in pension funds for traditional saving deposit accounts.

Many people, especially in the 50-65 age group have seen their pension values effectively vaporized in the last year. It is understandable that this group would seek out safer ways to guarantee their income streams for retirement.

Martin Ryan said...

In terms of channelling our optimism, one of the most detailed Irish Times articles that comes up on the topic is by Denis O'Brien, from last August:

"It's all about restoring our confidence and self-belief":

While the article contains some practical suggestions, O'Brien's own confidence-building measure was only announced in last week's business section of the IT - he has insisted that 1 in 3 news stories must be positive in the bulletins that are broadcast on the radio-stations that he owns.
And these stories do exist.

On the front-page of last Friday's Irish Times, there was much fanfare in the wake of an ECB cut that has made it easier for many mortgage-holders to service their debt. Approximately a week beforehand, we had the announcement from Eamon Ryan that energy prices are coming down by 10%, and this is on top of the Bord Gais decision to sell electricity for 10% less than the ESB. Also, apparently there are high levels of optimism among home-based business owners in both Ireland and the UK:

Martin Ryan said...

O'Brien article:

Martin Ryan said...


Martin Ryan said...

Perhaps we should start a new series (in the vein of "Warriors Against Rational Choice"), to be called:

"Reasons To Be Cheerful"

Gary Baumgarten said...

The psychological and spiritual impact of the economic downturn will be the topic of News Talk Online on Thursday March 12 at 5 PM New York time. My guests will be NY Mt. Sinai psychiatrist Dr. Elliot Wineburg and Marble Collegiate Church NY senior minister Michael Brown.

Please go to my blog to talk to them.



Alan Fernihough said...

Sorry Martin but I think the O'Brien owned Newstalk106 have already beaten us to the punch with a "Reasons to be cheerful," feature they play in between ads.

I won't comment on why they are trying to kill airtime in their advertisement slots.

Martin Ryan said...

Thanks for the heads-up Alan. It's actually been a while since I've listened into Newstalk...

Michael Daly said...

'Reasons to be cheerful' or 'Warriors against rational pessimism' is definitely a good way to go! There's plenty of experimental evidence in the psych literature to say the turn to the positive (especially nonconsciously)in times in the face of big negatives, is an inbuild psychological defense mechanism. It's there for a reason and that's to help get us out of this mess!