Why economics is still the 'dismal science'

Economists befuddled by the economy's twists and turns often fail to tap into data on the most optimist group – young people. Their hopeful 'animal spirits' may be the force for a full recovery.

Kyle Green/The Roanoke Times/AP Photo
John Baldridge, 13, returns a quail to a pen in the backyard of his home in Roanoke, Va. with the help of his father, Duke Baldridge. John raises quail eggs to sell to a couple of local restaurants.

When economists are at a loss for hard data to explain trends or make predictions, they fall back on a soft phrase first coined by one of their famed own, John Maynard Keynes.

It is “animal spirits.” 

That term of art may sound like a “Twilight” flick. But it refers to immeasurable qualities of human thinking that can put energy into free markets but don’t easily fit on a Wall Street spreadsheet or an academic graph.

One quality – optimism about the future – isn’t so animal at all. In fact, despite the dozy economy, hopefulness seems to be an abundant trait among Americans who have the longest future, young people.

Nearly 90 percent of them who hold jobs believe they will earn enough in the future. Even among those not working, that same optimism is still high at 75 percent, according to a recent Pew Research Center poll.

In sharp contrast, more than half of today’s adults older than 35, whether working or not, are pessimistic about their future earnings. What’s more, the economic bullishness of working young adults hasn’t changed much since even before the 2007-09 Great Recession.

Such polls stand out like the first spring blooms amid all the negative news about young people. Yes, this group’s jobless rate is above average. More than 1 in 5 lives with a parent. Students loans are a financial ball and chain. This group is dubbed “the lost generation.” Many have joined the “Occupy” movement.

But economists and government leaders must take notice that a young person’s stage-of-life confidence could be the most important animal spirit worth investing in.

Here’s one good reason: 54 percent of the so-called Millennials either want to start a business or already have started one, according to a 2011 poll funded by the Ewing Marion Kauffman Foundation. They have the gumption to take risks in investments and start-up firms, which are the main source of new jobs. Steve Jobs and Mark Zuckerberg are their idols. Apple and Facebook are their models. Hope is their primary capital.

And among an even younger crowd, 14-to-18-year-olds, the number who say they will be financially independent by their mid-20s has doubled over the past year.

The accepted narrative about the US economy, especially during the 2012 election campaign, must change to focus on such youthful yearnings. The recession and the slow recovery have shaken up old patterns of thinking, demanding more flexibility and creativity – qualities most associated with young people.

Take, for example, one change of lifestyle – driving habits. Since 2005, people under 34 are driving about one-quarter fewer miles, a sign that many of them embrace urban living, bicycles, mass transit, or working out of a home office (even if it’s in their parents’ house). They surf the Web more than steer an SUV.

The illusive animal spirit that can rev up the economy to full throttle isn’t hard to find. It’s on the bright young faces of those who don’t accept the dispiriting news about them.

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