Don’t Blame the Macroeconomy

It irks me when people blame “the bad economy” for why they don’t have a job.

It’s like arguing that your town used to be really cold, but now it is hot, because of global warming. It may be that your locality’s temperature rise was much larger than the average, but the converse doesn’t work. Just because the global average of the temperatures of a million different places increased by 1%, says nothing about your particular one-in-a-million situation.

edit: I’m not just an unsympathetic jerk; I apply this to myself as well. When I was unemployed I blamed idiosyncratic factors—like my own choices—and thought macroeconomic factors at most played a small role. When I failed at interviews, it was because of the way I presented myself / am, not because of the macroeconomy, that profitable companies didn’t want to hire me. When I succeed, I don’t “blame” the good macroeconomy.

It’s a confusion of the aggregate expectation with an individual case. Like saying that GDP rose, so your particular wage must rise as well.

It doesn’t logically follow that because the sum-total of all the individual behaviours in the economy is adding up to a few percent less, that you in particular will lose out. It’s not like the economy ground to a halt.

oh yeah, the "great recession" doesn't look so great on a 60-year time scale, does it?!

People still eat out at restaurants, take vacations, and trade with each other in all kinds of ways. The sails have been trimmed, so the aggregates now differ by a few percents here and there, but that’s probably a good thing if the society was building unnecessarily large houses in the Canaries and booking it as a profit even when the demand was falsidical.


I was running my first business when the world’s stock markets lost 40% of their value. Do you know how much drop I saw in business? Zero. In fact my revenues were increasing because more people were hearing about us.

Now, a business that’s fully-extended—that’s multiplied its business model into every crevice of every locality it can find space for—that large of a business, yes, is going to take a hit. But still, why should we complain so much about it? There are more cars in the world than at any time in the past, more iPads and iPhones, more great food being served, and the stock markets only receded to the levels of a decade before.

Credit: Images Courtesy of The Advertising Archives

That’s after 200 years of exponential growth, from the time when people didn’t get to wear socks or draw hot water from the tap, to the period when people are soooo bored by the iPad 3.

Generically speaking, the products/services that people cut first are the least important ones. In other words, only if your product was at the very margins of your customers’ demand curves, would they cut it from their budgets.

Granted it’s a little more complicated than that, either because you might be selling something to a particular group that was hit hardest (say you provide services to hedge funds—or say you live & work in an area that was hit the worst by the recession, many percentage points worse than the net total), or because of timing issues. (Bigger, more durable purchases like houses and white goods have different temporal demand than food.) But if you were running your business really well, wouldn’t you have embedded your product a little deeper in your customers’ demand curves? There’s always something else they could have cut besides your product, whether it be eating out less or taking one less vacation. Even if your customers are saying they don’t have the money to keep buying your product, the real truth is that they would prefer to cut your stuff than cut something else.


Likewise, people blame “the bad economy” as the reason they can’t land their dream job. But that may not be the real cause, for similar reasons. Not-hiring happens at the margins of labour demand—so how sure are you that you would actually be able to land the dream job “if only the economy were better”?

Here’s a related story. Way back in the Hadean Era, I was wait-listed at Princeton University. The wait-list didn’t advance enough for me to make it into that elite institution—but if it had, you could have said I just barely made it in. Sure, it was frustrating to “almost make it”—but realistically I couldn’t be too angry. There were so many people bristling at the spot ranked above & below me. If I wasn’t well within the bounds of what’s desired, then I might have been there just because of error in the ranking process (I might have drawn an ε>0). Instead, my ego took a write-down and I moved on.

Same thing with not getting your dream job. If you were handily above the required margin to get your dream job, then neither 10% unemployment nor 15% unemployment rate would keep you from landing it.

Nobody wants to lower their reservation wage, especially because HR people will ask enquire about your compensation upon your next application somewhere else—but still, are you in fact really worth all that you think you are?


One last positive about the Great Recession: since wealth-holders were hit most gravely by the decline in asset values, and wealth-holders tend to be old, the overall long-term effect on the economy could be positive. Why? Because the most experienced, effective, and highly networked individuals start going back to work and getting things done. Who do you think is more likely to start an effective business: that former CEO who came out of retirement because her assets were cut in half and she wants to keep living a comfortable lifestyle, or a college graduate who hangs out on YCombinator News and talks about how “start-ups” (meaning iPhone apps) are going to disrupt the world and end world hunger? Unless the lump-of-labour fallacy is in fact not a fallacy, adding the most effective workers back into the labour force is going to raise output and generally make the world better than if they had hung out at their Florida condo and sipped martinis by the swimming pool.

About isomorphismes

Argonaut: someone engaged in a dangerous but potentially rewarding adventure.
This entry was posted in Uncategorized and tagged , , , , , , , , , , , , , , . Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s