Beyond the Usual Economics
Economics professor Martha Starr’s recently released book, Consequences of Economic Downturn: Beyond the Usual Economics, helps readers to understand the social, not just the financial consequences of the recent economic recession.
“In the aftermath of the financial crisis, the bulk of the conversation emphasized financial issues, like why banks were taking on too much risk, or whether derivatives need to be regulated, for example” said Starr. “It seemed to us that no one was talking about how the downturn affected the average person, or whether there are underlying shortcomings in how economic policy gets made.”
Starr’s book focuses on the recession’s effects on average Americans, but it also tries to understand how the economy got to the point that it did. “There were lots of warning signs before the crisis hit,” says Starr. “The question is, why did influential economic policymakers not react to them?”
Starr, a former Federal Reserve economist whose research has focused on social dimensions of the U.S. macroeconomy, says “the financial crisis and ensuing recession reflected not just a malfunctioning of the financial system.” She argues that the recession also represents the “inequalities and insecurities in access to livelihoods that favor well-off groups and leave ordinary people shouldering undue burdens of downside risk.”
The book consists of studies by a variety of economists who all examine not only the financial causes of the economic downturn, but also solutions to it. Its three sections focus on “Ethics, Social Responsibility and Policy,” and “Distributional Effects of the Downturn,” and “Social Economy and the Economic Downturn: Communities, Needs and Capabilities.”
One contribution, from AU Professor Jon Wisman with PhD student Barton Baker, examines the role of rising inequality in contributing to the financial crises of 1929 and 2008. Many of the papers in the book go beyond the impact of the downturn on average Americans to provide insight on the ways it affects different groups differently. “People don’t think about the fact that disadvantaged groups are differently affected by economic recessions than others,” says Starr. “When people think of recessions they think of gross domestic product. They tend not to think about who exactly gets hurt.” Nikki Dickerson Von Lockette, professor at Rutgers University, for example, compares the impact of the 1980s and 2007-09 recessions on non-college educated black and white men. According to Von Lockette, in the recent recession, certain professions in which black men are disproportionately represented (such as transportation and other services) have not seen as severe job loss as fields such as manufacturing and construction. Thus, while black men bore a good part of the brunt of job loss the 1980s recession, that wasn’t the case in the recent downturn.
Another paper by AU Economist in Residence Caren Grown and PhD student Emcet Tas, “Gender Equality in U.S. Labor Markets in the Great Recession of 2007-10,” discusses whether the 2007-09 downturn was a so-called “man-cession,” in which men suffered more job loss than women. “Many of the sectors that had heavy job loss are largely dominated by men,” says Starr, especially manufacturing and construction. However, women have also been negatively affected by the weak labor market, for example, with many having to shift involuntarily into part-time work.
Starr’s own study, “Who Pays the Price when Housing Bubbles Burst?” coauthored by Cynthia Bansak of St. Lawrence University, uses data from the Census Bureau’s American Community Survey (ASC) to examine how the recession has affected homeownership, housing costs, home values, and other factors as well as job loss. The ACS, conducted nationally since 2005, collects census-like data on an annual basis, to help capture changes in the U.S. population between the decennial censuses mandated by the United States Constitution. Starr explains that the ACS is highly valuable for understanding the social implications of the recession. “A sample survey may not be adequate for something like congressional redistricting,” says Starr. “But for things like social programs, food assistance, and other aid programs, it allows us to see what is happening in a recession and who it is affecting.”
Starr hopes that her book will help many Americans understand all of the implications of the recent economic downturn, not just those related to finance and aggregate measures of economic performance. “It’s important that we all understand that recessions affect various groups of people in different ways,” says Starr. “There’s more to look at than just the changes in the economy as a whole.”