The Psychology of an Economic Recession
Economics and psychology are entangled in complex ways. All the psychotherapy in the world won’t make you happy if you don’t have enough money to live. I’ve written on here before about the mental health damage done by the “Great Recession.”
Since my last post on the topic, though, researchers have continued to investigate the psychological fallout of the 2008 financial crisis, with some interesting new results.
For example, a recent study focused on the effects of the crisis in Iceland, where the country’s three main banks went bankrupt in the span of a couple weeks. The researchers uncovered one way people reacted to financial problems brought on by the banking crisis: gambling.
They found that sales of tickets for several lottery-type games rose significantly in the wake of the crisis. Moreover, this rise in ticket sales was driven by people who experienced financial difficulties during the economic crisis.
At the same time, rates of problem gambling didn’t increase. Together, these results indicate that the financial crisis prompted people who experienced hardship to go out and buy lotto tickets, but not to develop gambling problems.
Another study looked at how the recession in the United States influenced the way college students’ values developed.
The authors found evidence for the idea that the Great Recession made young people more materialistic and communitarian, but hindered their ability to develop positive views of themselves.
Meanwhile, a group of researchers based in New York showed that unemployment and depression can create a vicious cycle. Their study found that developing depression after losing one’s job increases one’s risk for staying unemployed.
All these studies highlighting the mental health consequences of economic hardship have led some psychology researchers to look for interventions that can help people protect their mental health when they lose their jobs.
One review of previous research found that besides the practical benefits they offer, “job clubs” may be a real source of psychological support too, including by lowering people’s risk for depression. Still, there’s a reality here that isn’t very comforting: economic hardship has real psychological consequences, and the most effective solutions may be out of the hands of mental health professionals.