Economic recession: A self-fulfilling prophecy?

Apprehension about a U.S. economic downturn may be enough to push the country into a recession, says University of Hawaii at Hilo social psychologist Stephen Worchel, PhD.

In his research examining social change, Worchel sees similarities between the development of an economic recession and ethnic violence. Both situations begin with fear, Worchel says, often as a result of feeling threatened--by a drop in home values during an economic decline, or by a new political leader coming into power, as in the case of an ethnic conflict, for example. People look for ways to justify their uncertainty--someone or something to blame, Worchel says.

These fears are exacerbated when people talk to neighbors and friends who may be facing a house foreclosure and follow 24-hour news coverage that sensationalizes the country's economic issues. In election years, candidates often add to these concerns by predicting financial doom and promising solutions in exchange for votes.

Following their fears, people often want to take action to protect their assets, Worchel says, perhaps by tightening budgets, reducing spending and selling stocks--but these measures can make the situation even worse, by further reducing consumer confidence levels and driving an increase in inflation.

The upside, he says, is that anxiety should die down soon.

"Fear is such a strong emotion that it doesn't last very long," Worchel says. "There's a recognition that we can't continue to live this way ... and people start to take a more cognitive approach."

At that point, he adds, a focus on prevention becomes key. By helping people learn to adapt to economic ups and downs and develop sustainable spending habits, he says, they'll be less likely to give in to panic when the economy hits a rough patch.

-A. Novotney