IMF in 'severe downturn' warning UK 'already in recession' Prime Minister calls meeting with finance chiefs after nightmare of banks Europe in disarray over the crisis Britain will be the biggest casualty of the world downturn, says IMF Recession is here, say chiefs Thousands of small businesses face collapse Output kaput Take a look at these headlines, all extracted from reputable news websites on 8th October 2008.
If you are like most people, you will probably react with an ever-growing feeling of doom and gloom in the pit of your stomach.
But let's just stop for a minute and take a look around.
Is it all really as bad as we think? Now, before you read on, I am no economist and I am not professing to know the answer.
However, as a business psychologist, I would like to discuss the psychological impact of the current media hype surrounding the credit crunch.
Peter Jones, successful entrepreneur and 'Dragon', recently appeared on the BBC Breakfast programme and is quoted as saying "we are not in a recession; it's nonsense; we are not far away from talking ourselves into a recession; let's stop the doom and gloom; we will bring the economy down by talking about this recession.
" Is this true; are we driven to recession or do we talk ourselves into one? In the main, people tend to be bombarded with information from all angles.
As a result, we often find ourselves in situations where there are more demands on our resources than we have resources available.
This is known as information overload.
To help make most efficient use of our finite cognitive faculties, we have developed a number of strategies to cope with information overload - one of which is known as 'heuristics', or simple rules for drawing complex inferences or making difficult decisions rapidly.
One such heuristic in the 'availability heuristic'.
According to this type of heuristic, the easier it is to bring instances of some event to mind, the more prevalent or important the event is deemed to be.
By employing such a rule, we decrease the cognitive effort needed to reach conclusions in a rapidly changing environment, but it also leaves us open to erroneous conclusions.
The erroneous conclusions drawn from employing this tactic then leave us subject to what is termed 'priming'.
To give an example, first year medical students tend to be prone to a condition called "medical student syndrome".
It seems that as a result of being bombarded with information on diseases and ailments, students tend to misinterpret a simple sore throat as something much more catastrophic.
The same logic could apply to the current economic situation and could result in a vicious cycle that leads us into a real recession.
Consider a fictional individual.
The media overplays the current situation for sensationalist appeal; this is further supported by water-cooler gossip, rumour and speculation; the media drastically increases its coverage of the apparent "recession" and the individual becomes bombarded with information.
To deal with this information overload, through the availability heuristic and priming, the individual draws erroneous conclusions about the severity of the situation.
The individual stops borrowing and spending.
Now multiply this behaviour to every individual in the country.
People stop spending and borrowing; the economy falters.
The media again overplays the situation for sensationalist appeal and the whole cycle begins over.
End result - recession.
But in this example, it was not the economy that brought us to recession it was our reaction to inaccurate conclusions made using fallible decision-making processes.
With such conflicting reports in the media currently, it is no surprise that people are feeling overwhelmed.
In such a situation, we need to be careful not to overplay the severity of the truth from available information and leave us in a situation where the tail is wagging the dog.
Ask yourself, if there is no real recession at present, are we in danger of talking ourselves into one? Jon Atkins Business Psychologist www.
pernkandola.
com
If you are like most people, you will probably react with an ever-growing feeling of doom and gloom in the pit of your stomach.
But let's just stop for a minute and take a look around.
Is it all really as bad as we think? Now, before you read on, I am no economist and I am not professing to know the answer.
However, as a business psychologist, I would like to discuss the psychological impact of the current media hype surrounding the credit crunch.
Peter Jones, successful entrepreneur and 'Dragon', recently appeared on the BBC Breakfast programme and is quoted as saying "we are not in a recession; it's nonsense; we are not far away from talking ourselves into a recession; let's stop the doom and gloom; we will bring the economy down by talking about this recession.
" Is this true; are we driven to recession or do we talk ourselves into one? In the main, people tend to be bombarded with information from all angles.
As a result, we often find ourselves in situations where there are more demands on our resources than we have resources available.
This is known as information overload.
To help make most efficient use of our finite cognitive faculties, we have developed a number of strategies to cope with information overload - one of which is known as 'heuristics', or simple rules for drawing complex inferences or making difficult decisions rapidly.
One such heuristic in the 'availability heuristic'.
According to this type of heuristic, the easier it is to bring instances of some event to mind, the more prevalent or important the event is deemed to be.
By employing such a rule, we decrease the cognitive effort needed to reach conclusions in a rapidly changing environment, but it also leaves us open to erroneous conclusions.
The erroneous conclusions drawn from employing this tactic then leave us subject to what is termed 'priming'.
To give an example, first year medical students tend to be prone to a condition called "medical student syndrome".
It seems that as a result of being bombarded with information on diseases and ailments, students tend to misinterpret a simple sore throat as something much more catastrophic.
The same logic could apply to the current economic situation and could result in a vicious cycle that leads us into a real recession.
Consider a fictional individual.
The media overplays the current situation for sensationalist appeal; this is further supported by water-cooler gossip, rumour and speculation; the media drastically increases its coverage of the apparent "recession" and the individual becomes bombarded with information.
To deal with this information overload, through the availability heuristic and priming, the individual draws erroneous conclusions about the severity of the situation.
The individual stops borrowing and spending.
Now multiply this behaviour to every individual in the country.
People stop spending and borrowing; the economy falters.
The media again overplays the situation for sensationalist appeal and the whole cycle begins over.
End result - recession.
But in this example, it was not the economy that brought us to recession it was our reaction to inaccurate conclusions made using fallible decision-making processes.
With such conflicting reports in the media currently, it is no surprise that people are feeling overwhelmed.
In such a situation, we need to be careful not to overplay the severity of the truth from available information and leave us in a situation where the tail is wagging the dog.
Ask yourself, if there is no real recession at present, are we in danger of talking ourselves into one? Jon Atkins Business Psychologist www.
pernkandola.
com
Source...