Jan-Emmanuel De Neve and Michael I. Norton have found there’s a signficiant asymmetry in the way individuals experience positive and negative macroeconomic fluctuations:
We find evidence that the life satisfaction of individuals is between two and eight times more sensitive to negative growth as compared to positive economic growth. People do not psychologically benefit from expansions nearly as much as they suffer from recessions.
These results suggest that policymakers seeking to raise wellbeing should focus more on preventing busts than inculcating booms. Our results also offer an explanation for why increases in GDP do not always pay off in increases in happiness – the modest happiness gains accrued over years of growth can be wiped out by just a single year of contraction.
In the case of Greece, for example, the crisis that started in 2008 led to a decrease in average wellbeing that erased all prior gains. Average wellbeing in Greece now stands at a level below historical records, despite real income remaining at a level well above historical figures.
What that asymmetry suggests—for Greece and elsewhere—is that even a significant economic recovery on current terms will not and cannot generate an improvement in wellbeing anytime in the foreseeable future that can compensate for the losses generated since the crisis began.
To put it in other terms, it’s much easier and quicker to destroy what exists—such as people’s lives and livelihoods during the Second Great Depression or, as in the case of the University of Southern Maine, educational institutions—than to rebuild it.