Too Scared, Or Not Scared Enough?

What a difference a day makes in the op-ed pages of The New York Times. Last Saturday, Yale's Robert Shiller warned that talk of a depression could lead to one:

The attention paid to the Depression story may seem a logical consequence of our economic situation. But the retelling, in fact, is a cause of the current situation — because the Great Depression serves as a model for our expectations, damping what John Maynard Keynes called our “animal spirits,” reducing consumers’ willingness to spend and businesses’ willingness to hire and expand. The Depression narrative could easily end up as a self-fulfilling prophecy.

Sunday, columnist Frank Rich – not heretofore known as an economist – warned that we weren't scared enough:

One of the most persistent cultural tics of the early 21st century is Americans’ reluctance to absorb, let alone prepare for, bad news. *** Obama’s toughest political problem may not be coping with the increasingly marginalized G.O.P. but with an America-in-denial that must hear warning signs repeatedly, for months and sometimes years, before believing the wolf is actually at the door.

Who to believe? Let's go with Shiller. He just received the Deutsche Bank Prize in Financial Economics 2009.

(Please keep smart-aleck questions like "What does a bank know about financial economics?" to yourself.)