What if a Recovery Is All in Your Head?  ROBERT J. SHILLER     NYT

Beyond fiscal stimulus and government bailouts, the economic recovery that appears under way may be based on little more than self-fulfilling prophecy. Consider this possibility: after all these months, people start to think it's time for the recession to end. The very thought begins to renew confidence, and some people start spending again -- in turn, generating visible signs of recovery. This may seem absurd, and is rarely mentioned as an explanation for mass behavior late in a recession, but economic theorists have long been fascinated by such a possibility.

The notion isn't as farfetched as it may appear. As we all know, recessions generally last no more than a couple of years. The current recession began in December 2007, according to the National Bureau of Economic Research, so it is almost two years old. According to the standard schedule, we're due for recovery. Given this knowledge, the mere passage of time may spur our confidence, though no formal statistical analysis can prove it.

Certainly, people did not always believe that there is a regular "business cycle" that starts and stops in a definite pattern. The idea began to spread in the popular consciousness in the 1920s and reached full bloom in the '30s -- with one major complication, the Great Depression, which received its name in midcourse, from a 1934 book with that title by Lionel Robbins.

In fact, in 1937, "Think and Grow Rich," a book by Napoleon Hill, urged readers to adopt a positive mental attitude and to channel the power of the subconscious mind so that real wealth would follow. It became a runaway best seller. Faddish interest had already emerged not only in Freud's theory of the unconscious mind, but also in the theories of the psychologist Émile Coué, who urged people to recite that "every day in every way I'm getting better and better." He said this "autosuggestion" would bolster the unconscious self.

In important ways, we are still using that 1930s pattern of thinking. We are instinctively fearful of reckless talk about depressions, and we try to support one another's confidence. We like the idea that modern scientific economics seems to show that all recessions end in due course.

My mother's copy of Think and Grow Rich remains a treasured part of my library--as an example of US popular psychology.  Sadly, it seems not to have worked for either of us. It was written by the then CEO of Ralston-Purina, a well known manufacturer of dog food. That odd fact perhaps adds a layer of meaning to former Virginia Congressman Tom Davis's comment about the Republican Party's brand image: "If our party's brand were dog food, they would be taking it off the shelves. No one is buying our dog food."  

"It is not necessary to have hope in order to persevere."