HOMO ECONOMICUS, HE DEAD:

[I]t's instructive to remember that global recessions have usually begun suddenly and been a real surprise to most people. As I have argued in this column and with George A. Akerlof in "Animal Spirits" (Princeton 2009), such events can largely be ascribed ultimately to contagious stories of wide significance. Basically, global recessions tend to begin when newly popular narratives reduce individuals' motivation to spend money. Psychology matters a great deal.

The biggest recession of all, the Great Depression, began suddenly with the stock market crash of October 1929, as Christina Romer, the former chairwoman of President Obama's Council of Economic Advisers, pointed out in a famous paper. Even before 1929 was over, she found, department store sales and automobile registrations had declined, indicating that consumer spending had already dropped sharply. But why?

Economists were alarmed by the crash, she found, and their warnings helped make consumers wary. But let's not overestimate the importance of these economic forecasts: Most people never actually read them. They received their information from other channels.

Back then, immediately after the market crash, church sermons were a powerful influence. Congregations were told that many businesspeople had behaved like gamblers and hucksters. Through these sermons and other word-of-mouth sources, moralizing about the stock market crash spread, affecting mass psychology. Frederick Lewis Allen, in the epilogue to his 1931 best seller "Only Yesterday: An Informal History of the 1920s," wrote that cultural values changed after the crash: People began to dress more modestly, adopting a new formality and religiosity, reviving Victorian sexual taboos. It is reasonable to assume that many of these changes had an economic impact, mainly by discouraging spending.

Similarly in more recent downturns, broad cultural and social changes had big effects, too. Since World War II, there have been four global recessions, according to the International Monetary Fund, which defines such an event very specifically as negative global per capita economic growth over at least one year. In each case, these recessions lasted only one year, though relatively slow economic growth rates were also an issue in periods surrounding them. The recessions ended in 1975, 1982, 1991 and 2009.

As they had with the Great Depression, economists have cited concrete causes for these events. Oil has been named as a fundamental factor in each case, with price spikes blamed on the Yom Kippur war of 1973, the Iran-Iraq War beginning in 1980, the 1990-91 Persian Gulf war and rising energy demand in China and other emerging countries in 2008.

Broader social narratives are sometimes ignored, but they matter, too. Consider the recession of 1975. Along with oil prices, common ways of understanding and describing daily life also changed. The oil crisis was widely said to signal the end of an era of abundance. Lower highway speed limits were imposed to conserve fuel, and cars grew smaller. Americans were told to lower their home thermostats to 68 degrees. In large numbers, people began wearing sweatsuits, flannel leg warmers, thermal underwear and long johns. Among all this austerity, the economist E. F. Schumacher's 1973 best seller "Small Is Beautiful" became a global morality lesson.

Let's jump to the most recent global recession, the one of 2009. Oil prices, subprime mortgages and the freezing up of the financial system after the collapse of Lehman Brothers were all important factors. But why did we have a global recession? The transformation of distinct events into a broad global slowdown occurred through a variety of mechanisms. Reports about financial misdoings, the possible collapse of venerable institutions, rising unemployment caused by advanced technology -- all of these affected the psychology of spending.

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