After reading Aditya Chakraborttya’s article “Economics has failed us: but where are the fresh voices?” I was looking for an opinion on the Great Recession from someone other than an economist. I came across an article from the International Journal of Critical Psychology titled, “Irrational exuberance: Neoliberal subjectivity and the perversion of truth (2010).” I immediately noticed that Irrational Exuberance is also the title of Robert Shiller’s book. The article’s author is Lynne Layton, Assistant Clinical Professor of Psychology at Harvard Medical School.
This article was not at all what I expected but found it interesting nonetheless. Layton draws on Freud’s work regarding the perversion of truth (substitution a less painful lie for the truth) and shockingly goes into details on sexuality which you may not have thought has anything to do with economics. Her vignettes provide realistic scenarios of ordinary people’s lives pertaining to housing prices and endless wants and needs. After the replacement of defunct Keynesian principles with Neoliberalism in the 1970s, many people started to feel that the government was no longer able to take care of them. They felt vulnerable. By the Bush years, the government fostered the idea that vulnerability and scarcity could be addressed only with economic growth. The takeover of free market fundamentalism led to people becoming more susceptible to the feedback which leads to economic bubbles. The 1980s and 1990s led to great materialism but before that people expected the government to prevent housing prices from getting out of control. Shiller writes, “Our increasing public commitment to market solutions to economic problems is the ultimate cause of the public’s worry about instabilities in home prices.”
Some sources of feedback which makes us more vulnerable to economic bubbles are: internet culture which promotes a false sense of omnipotent control, the ubiquitous statement in books that “any stock market decline must quickly be reversed,” and the unwarranted optimism of the business media. (Shiller)
Layton makes the claim that based in psychoanalytic theory, people who do not feel cared for by the government (since housing prices skyrocketed) will not be able to face limits and thus be even more vulnerable to bubbles. At the same time, people are oddly calmed by the recession since there is now a sense that everyone is in the same boat.
This article came out two years before Chakraborttya made the claim that no social scientists have given their input on the social consequences of the Great Recession. Although Chakraborttya was also mainly focused on the U.K. so it is possible that social scientists in the United States have been more attentive to the economic crisis and its effects. I am glad that there is a presence of psychologists and sociologists in economics. I really think that in order to get to the bottom of the Macro problem, we need to look deeper into the thoughts and behaviors of the individual.