What came first: the recession or the speculation about the recession?

I remember my first year macroeconomics lecturer despairing from the front of the room at news outlets that fueled discussions of imminent recession. In his mind, this talk was just as central to the start of economic downturns as any other factor predicating recession. But maybe everything isn't as clear cut as that. Is it really possible that we talk our way into recessions?

The case for recession first
An extensive article by Bill Conerly in Forbes argues that actually, if we consider historical recessions and economic downturns, it may be difficult to make the case that talking about recession leads to recession. Conerly uses consumer surveys and associated indicators to measure public perception about economic health prior to recessions. Certainly whilst consumer confidence dropped in the 1990s before economic difficulty, correlation does not equal causation as Conerly points to the greater significance of the First Gulf War and jumps in oil prices as more likely to have triggered this incident. Recession in 1948-49 as well as 1954 actually occurred in spite of consumer confidence in the economy, once more linked more significantly to external factors and government policy. Certainly in the midst of a global pandemic and its associated economic blows, it would be difficult to say that we had been talking ourselves into those measures.

The case for talk about recession first
Perhaps it is more apt to say that recession talk is not always something important in the cultivation of an economic environment of recession. But sometimes, it just might be. In an age increasingly dominated by media, news, opinion pieces and alarming twitter threads, what people are talking about is more accessible than ever. And not just what your mates are talking about but discussion with claimed experts, actual experts and speculation from trusted networks. It is difficult to imagine that this has no impact on the decisions we make, particularly if you have investments or assets, and particularly if you do not have the capital to make big losses. The financial crash of 2008 is not quite out of memory, and those who lost out from the crash and its fallout are unlikely to want to find themselves in such a situation again. Media narratives will contribute to household decisions to spend money or save, whether to make a riskier investment or take a more well-trodden path. For businesses, these narratives are important for making moves to expand or contract, to continue hiring or let go of some staff. If media incessantly reports about imminent recession or indicators of recession, it can lead to a somewhat self-fulfilling situation. People hear that a recession is coming and begin to cut back on spending to dedicate more of their income to saving. This in turn reduces demand in certain markets, which may necessitate a contraction within businesses. Dominos falling comes to mind. Of course, for this to be the case, enough people would have to be responding to reports, to make noticeable dents on businesses etc.

(I hope you appreciate this illustration of a domino effect which I scrolled for too long to try and find again)

So maybe there is a middle path; recessions are caused by a multitude of things and combinations of things. One of those things may be talk. Leaving us with the unsatisfactory answer that neither comes first necessarily.

International Women's Day

8th of March is International Women's Day so let's talk about gender diversity in economics!

Economics is slowly waking up to the idea that gender diversity is important but today the discipline is still far from equality of the genders. Women are still underrepresented at every stage of economics, from A-levels to undergraduate, Master's, Ph.D. and Professorship - the higher you go on the ladder of academic economics the fewer women you encounter. 

The Diversifying Economics Network (a student-run society at the University of Manchester) put up flyers around campus drawing attention to some of these facts (you should also check out our Twitter to find out more!). When you consider the intersection of gender with race you will find that the stats for Black Women are even more depressing as Anna Gifty Opoku-Agyeman and Dr. Lisa D. Cook document in a recent article for the New York Times

When faced with these facts it is hard not to despair at times, but fortunately, it seems like change is coming. Anna Gifty Opoku-Agyeman herself is co-founder of the Sadie Collective is another student-run organization that is committed to increased representation of Black Women in the economics profession. Similarly, there are more and more diversity-networks and groups emerging at U.K. universities.

Yet to some (men) it is still unclear why we need diversity in economics. Apparently, equality in itself is not enough. Although most (men) would probably not openly stand against equality. No, instead the reason that there are so few women in economics is simply that WoMen DOnT wAnT to Do EConOmiCs or WoMEn aRe BAd aT MAtH. The second statement is not even true, but often economists prefer to rationalize things away rather than investigating and understanding why there is such a lack of diversity in economics. Maybe it's the aggressive seminar culture, the lack of female role models, or the fact that almost every economist on TV is a man in a suit.

The misconception that economics is mostly about finance, GDP, or stock markets likely alienates many talented women from considering the profession in the first place. On average it seems like women are more drawn to other "softer" social sciences (or they are socialized in this way I mean who knows) such as sociology or political science. But (!!!) economists actually study similar phenomena as most social scientists. They just use different tools. Whether asking questions about universal basic income, gender quotas, or health care, economists are sure to have something to say on the issue. Economics is a social science and studies society, not just "the economy".

Changing our public understanding of what economists actually do could help draw people from more diverse backgrounds in the field. The Discover Economics campaign, launched in 2019, does exactly that! The campaigners hope to broaden the appeal of economics and draw more diverse students into the discipline. They focus primarily on A-Level students, teenagers that will soon make a decision on what they want to study at University.

While the current statistics on diversity in economics may seem discouraging, change is coming! Campaigns such as Discover Economics and the various student societies will hopefully help draw more students to economics and create a welcoming and respectful environment. Hopefully, this means that for the next few International Women's Day I can report some progress.