Not Shying Away from Recessions

Economics professor Paul Zak in conversation with Krista Tippett on "The Science of Trust: Economics and Virtue," Speaking of Faith, July 9 2009:

"Economists talk of the cleansing effect of recessions. So recessions are necessary because they kind of cull out the companies that are not providing the best customer service, that are not making a profit, that are not providing some product or service that people need. And when those businesses go out of business, then those resources are redeployed to more important uses. The machines are reused; the people get different jobs. And so this keeps the economy kind of efficient. We don't want to kind of limp along and have high levels of inefficiency just because we love the name General Motors or love the name of some company if they can't kind of keep up with the herd. So competition drives that and that's an important part of maintaining efficiency.

But I think the same thing can happen in individual lives. I think as we get towards the end of every boom period, today or two years ago, the end of the 1990s and dot-com bubble, the end of the '80s and this kind of me generation, I think we do get out of whack because human beings are adaptable and we are watching what other humans are doing. We also become adaptable to this sort of yuppie, more stuff for me lifestyle.

I think, from a spiritual perspective, that recessions are also cleansing. So I think it's very important that we don't shy away from recessions and we don't try to outlaw them. I think we should say, 'Hey, there were excesses. This is how the excesses are corrected. And the excesses were both kind of on the macro level and even perhaps in my own life. Maybe I got a little over-excited about the extra bonuses I was getting and the bigger car. And now I want to sit down and reevaluate what's really important to me.' So I think there are great analogies between the micro and the macro, and we should embrace that.

Having said that, the stress issues are strong. One of the pieces of advice I like to give is: Turn off your TV. Don't listen to the pessimistic news every second of the day...

...Appropriate levels of stress are very good for human beings...There's sort of this misnomer that stress is bad. Too much stress is bad, but also too little stress is bad. So there's sort of this inverted U-curve...this sweet spot for stress that focuses your attention. So I think that when we're in that sweet spot, when we're focused, our memory's better and we're thinking clearly and we've got to figure out what to do next, that's actually very good for human beings and actually all other animals as well."