Understanding Economic Pessimism in a Prosperous Era
In financial markets, bouts of collective exuberance can sometimes trigger investment frenzies, which ultimately lead to market crashes. For many market enthusiasts, the phenomenon of mass delusion is captivating—and it doesn’t just happen in markets. This collective mindset permeates other aspects of society. For example, more Americans today believe that crime rates are rising, despite data from Pew Research showing that crime in the United States, especially violent crime, has declined significantly since the 1990s. Yet the perception of societal decline persists, even as data shows that quality of life has improved substantially over time.
Two decades ago
a book titled It’s Getting Better All the Time by Stephen Moore and Julian Simon illustrated major improvements in human development: people are generally taller, healthier, and less impoverished. Household incomes have risen while household sizes have decreased, resulting in greater income per family member. In fact, child mortality—a robust indicator of overall living conditions—has dropped from 44% in 1800 to just 3.7% today. Even in recent years, the trend continues, with global under-five mortality rates plummeting from 12.8 million in 1990 to 4.9 million in 2022, according to the World Health Organization.
Despite such progress
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economic pessimism is widespread in America. Social media platforms like TikTok have popularized terms like "the silent depression," promoting the idea that getting by today is harder than ever. However, current economic indicators sharply contrast this notion. During the Great Depression, the U.S. GDP shrank by 35%, international trade plummeted, and unemployment surged to 23%. Today, the economy has been expanding, unemployment remains low at 4.1%, and wages are rising. So why do many Americans feel economically strained?
Historically
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, public sentiment about the economy reflected actual conditions. When the economy improved, optimism followed; during downturns, sentiments dipped. Yet in 2020, this relationship changed. Although the economy rebounded post-pandemic, public sentiment did not recover. The detachment between economic data and public outlook marks an unusual divergence with no precedent in recent history.
Various surveys reveal the extent of the pessimism. According to Pew Research, a majority of Americans believe the economy is worsening, with 58% feeling that life was better 50 years ago. In a poll by The Atlantic, only 20% of respondents thought the economy improved over the last year, and even Democrats—typically optimistic about the economy—expressed a bleak outlook. Interestingly, while Americans may view their own country critically, international surveys indicate rising global approval of the U.S. model.
One contributor to economic frustration may be grocery costs, which have risen faster than inflation. Unlike housing or car prices, which affect fewer people on a regular basis, grocery prices impact all households every week. This consistent reminder of rising costs contributes to the sense of economic hardship. Higher incomes for lower-wage workers have offset some inflation impacts, but expectations for continuous wage increases may leave people feeling shortchanged when costs rise alongside earnings.
The pandemic likely exacerbated the public’s negative mood
. Boston University research found that American adults experiencing depression jumped from 8% to 28% by April 2020, reaching 32% in 2021. Moreover, anxieties about artificial intelligence (AI) are adding to the gloom. While AI promises transformation across industries, 46% of Americans using AI at work worry about job displacement. Yet history shows that technological advances generally shift labor toward new roles rather than causing mass unemployment.
Another aspect to consider is humanity’s overall progress in combating large-scale challenges. For instance, deaths from natural disasters have fallen by 75% over the past century, despite a significant rise in global population. Extreme poverty rates have more than halved over the past twenty years. Education levels are also higher worldwide than ever before. These improvements suggest that society is far from a “silent depression,” though the perception of struggle remains.
Ultimately, while news about disasters and crises dominates headlines, data show that the world has seen remarkable progress. A more constructive approach to the current economic climate may involve redirecting energy from worrying about abstract global issues to actively enhancing our personal and communal lives. Economic data may suggest prosperity, but each individual has control over how they respond to adversity. By focusing on physical health, community involvement, and personal growth, we can counteract the pervasive sense of economic pessimism and feel more optimistic about the future.
In closing, while surveys reflect a growing dissatisfaction with the economy, the reality is that life for most people in America is economically better than it was in the past. For those who wish to see things improve, taking action at the local or personal level may offer a far more effective path forward than dwelling on broader economic issues that are beyond individual control.
In financial markets
, periods of contagious exuberance sometimes take hold, sparking waves of investment enthusiasm that can culminate in spectacular market crashes. Such collective delusions aren’t limited to markets; they occur in broader society too, as public perception often diverges from reality. According to Pew Research, many Americans believe crime is on the rise, especially nationally, despite data showing that violent crime has steadily decreased in the United States since the 1990s. This disconnect between perception and fact extends beyond crime statistics—many indicators point to substantial improvements in quality of life over the past century.
A significant body of research supports this notion of progress. Twenty years ago, Stephen Moore and Julian Simon published It's Getting Better All the Time, a book that detailed a century's worth of positive societal trends. Among the findings: people today are taller, healthier, and wealthier than ever before. Poverty rates have fallen, and household incomes have increased. Additionally, global access to education, healthcare, clean water, and essential services has expanded, benefiting millions. Statistics like global child mortality rates—a comprehensive indicator of improvements in healthcare, nutrition, and safety—have fallen from 44% in 1800 to just 3.7% today. Even in recent decades, life expectancy has increased, and the number of under-five child deaths worldwide has dropped from 12.8 million in 1990 to 4.9 million in 2022, according to the World Health Organization.
Despite these gains, a pervasive sense of economic pessimism remains. In the United States, consumer sentiment has declined, with many Americans convinced that economic conditions are worsening. Ironically, most Americans are actually better off financially than they were a few years ago, with rising incomes, low unemployment, and declining inflation. The labor force participation rate has increased, and for the first time in years, there are more jobs available than job seekers. But surveys indicate that Americans are more pessimistic about the economy today than they were thirty years ago. Terms like “silent depression,” popularized on social media platforms, underscore this sentiment. Yet these claims often lack basis in reality; during the Great Depression, for instance, unemployment was at 23% compared to today’s low rate of around 4.1%, with GDP contracting by 35%, a stark contrast to the robust growth of the modern U.S. economy.
This divergence between economic reality and public sentiment is unique to recent years. Historically, when the economy improved, consumer sentiment followed suit. This pattern changed dramatically after the economic fallout from the pandemic. Although the U.S. economy recovered at an unprecedented rate, public confidence has yet to rebound. This divergence has led to a growing mismatch between economic indicators and consumer sentiment, a phenomenon unseen in previous economic cycles.
Several factors may explain this trend. Some researchers believe that rising grocery prices, a daily reminder of inflation, are affecting Americans’ economic outlook. Gilad Edelman’s study at The Atlantic found that while housing inflation was expected to be a concern, the rising cost of everyday groceries was a more common complaint. Unlike home prices, which can be deferred or only affect some Americans, grocery prices impact nearly everyone, offering a tangible example of inflation that consumers face weekly.
Additionally, the pandemic and lockdowns may have contributed to a more pessimistic outlook. Boston University researchers found that rates of depression spiked during the pandemic, and have remained elevated, contributing to a national mood of discontent. The rapid advancement of technology, particularly AI, has further fueled anxiety about job security. Historical precedents, however, suggest that automation typically shifts employment rather than eliminating it altogether, increasing overall productivity and creating new job opportunities. A century ago, similar fears were widespread as telephone switchboard operators, once a significant job sector, faced replacement by automation. Despite initial job losses, workers quickly transitioned to new industries and roles.
Beyond economic concerns, there are indeed many global indicators of positive change. The Doomsday Clock reminds us of our proximity to existential threats, yet we also have evidence that humanity can navigate challenging times with resilience. Fatalities from natural disasters, for instance, have fallen by 75% over the last century, despite population growth, due to improved infrastructure, healthcare, and emergency response systems. Extreme poverty has more than halved in recent decades, and global access to education and democracy continues to expand.
