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Many Say It Feels Like We’re in a Recession, but Do They Really Believe It?

Talk is cheap, as they say.

By guest author Peter Jacobsen
May 14, 2024

Off and on over the last two years, we’ve heard from major media outlets about something called a “vibecession.”

The idea behind a vibecession is straightforward. Many people say they “feel” like we’re in a very bad moment economically, despite the fact that inflation has begun to slow relative to its worst levels (granted, prices aren’t going back down), unemployment rates are low, and average incomes seem to be rising again after the economic downturn caused by Covid policies.

Recent reporting claims the vibecession is cooling down, but the question is, was there ever anything to it?

Well, it’s possible that people are still adjusting to higher price levels (which have only continued to go up over the last year), but overall I’m skeptical of people’s claimed feelings about the economy. To see why, let’s consider how economists learn about the world.

Demonstrating Preferences

In introductory microeconomics classes, economists often start by presenting some postulates based on human action. The reason they start there is because the economy is really complex and involves literally thousands of moving parts. If we can’t understand even the individual parts, how can we hope to understand the economy itself? This raises the question: how can we know about human beings if we can’t put them under a microscope?

One way we can do this is by thinking through the logic of action. If a human acts in a purposeful way (so involuntary bodily movements are excluded), this means that he has to choose between alternatives. If you are hungry, you have lots of options. You can run to the kitchen and make a meal, go out and buy a meal, gorge on junk food instead of a full meal, or you could skip eating entirely.

If someone chooses to skip lunch to save money, he is demonstrating that he prefers to save his time or money over the possibility of eating. This is called demonstrated preference, or, alternatively, some economists call it revealed preference. Sometimes people quibble over which term is more appropriate, but there’s no need to do so here.

The economist Murray Rothbard wrote about demonstrated preference in his article Toward a Reconstruction of Utility and Welfare Economics. Rothbard says:

The concept of demonstrated preference is simply this: that actual choice reveals, or demonstrates, a man’s preferences; that is, that his preferences are deducible from what he has chosen in action. Thus, if a man chooses to spend an hour at a concert rather than a movie, we deduce that the former was preferred, or ranked higher on his value scale. Similarly, if a man spends five dollars on a shirt we deduce that he preferred purchasing the shirt to any other uses he could have found for the money. This concept of preference, rooted in real choices, forms the keystone of the logical structure of economic analysis, and particularly of utility and welfare analysis.

Economists can claim to know the preferences of individuals because, where the rubber meets the road, people always act to choose the option they like best.

Cheap Talk

This approach is different from many other social science approaches. Oftentimes, social scientists will try to figure out people’s preferences by asking them.

This seems sensible on the surface. Want to know what someone is thinking? Why not just ask him?

There’s actually a good reason not to ask him. Let’s use demonstrated preference to explain why.

Let’s say I survey a group of recent college grads. I ask them on a scale from 1 to 10 how afraid they are about paying back their student loans.

Let’s imagine they all say 10. What does that demonstrate? Well, it demonstrates that they value giving the answer of 10 more than they value giving any other answer.

But is the answer that people prefer to give always the true answer? Of course not. We shouldn’t expect that to be the case.

There are lots of reasons why we might expect people to give inaccurate answers rather than accurate answers.

First, sometimes people give inaccurate answers because providing accurate answers is too costly. If I walk up to you and survey you on the street, it’s asking a lot for me to demand that you provide a thorough analysis of your level of fear about student loans. Most people will give their gut reaction, but likely after significant thought their answer might change.

Second, people may decide to exaggerate their answers when they feel it is in their best interest to do so. If the group of students all favor their student loans being forgiven, they may decide the best answer for them is to say they can’t bear the weight of their student loans. Maybe if they all yell loud enough, the politicians who rely on their support will try to send them some money to guarantee loyalty.

A physician doesn’t always prescribe or recommend heavy pain killers when someone rates his pain as a 10. This is because physicians know that someone saying his pain is a “10” doesn’t always mean his pain is bad. It may just mean that the patient prefers to say the thing that gets him painkillers.

This is all a very long way of saying a very simple, and frankly trite, fact of life: talk is cheap.

When people buy goods and services, they have to sacrifice money to do so. They demonstrate their preference for the goods by their willingness to sacrifice.

No equivalent sacrifice exists in answering survey questions. As such, how you answer a question doesn’t tell me what you really think; it tells me what answer you most value giving.


This mentality doesn’t mean you shouldn’t ever trust or believe anyone. If you know someone and trust his or her ability to be honest and accurately self-evaluate, of course you should trust his or her statements.

However, this way of thinking about human action provides us with some useful tools for assessing how much people believe things. If talk is cheap, people should be willing to do more than talk when important issues are at play.

For example, imagine someone tells you he believes the economy is going to collapse tomorrow. He assures you that it will be the worst crash in history, and the stock market is going to be obliterated.

Here’s a simple follow-up question to ask him: “How much of your own money have you risked shorting the market?” If the market is going to collapse tomorrow, next week, or next month, a person could make millions by properly shorting the market. If someone comes to you offering a message of doom and gloom, check and see if he believes it enough to risk his own money.

A similar question could be asked about rising sea levels and owners of beachfront houses. Do alarmists who live in areas threatened by climate change tend to move away from those areas, or do they tend to stay? If they stay, that tells me they might believe adaptation can overcome the climate difficulties we face.

What about the vibecession? Well, we can imagine ways that people would be acting if they felt like we were about to enter a recession. In a recession, stock markets tend to get hit. Again, in that case, people who believe a recession is on the horizon should be pulling their money out.

If we were actually in a recession, we would also expect that people would cut back on unnecessary consumption. People tend to save money when they think they may lose their job at any moment. And yet, consumption expenditures have been going up ever since the pandemic ended.

This isn’t a bulletproof case against a secret vibecession, but the point is simply that if people are saying that we are in a recession (or we are about to be), but they aren’t acting like that’s the case, I’ll tend to trust their actions over their words.

Due to this, I remain a skeptic of the vibecession. I’m not shorting any markets, so I must not be too seriously concerned about the economy in the short term. That doesn’t mean I’m correct, of course, but it does highlight how it is valuable to ask people to “put their money where their mouth is” when it comes to proclamations about impending doom.

This piece was first posted on, you can find the original here.

Peter Jacobsen is an Assistant Professor of Economics at Ottawa University and the Gwartney Professor of Economic Education and Research at the Gwartney Institute.
Catalyst articles by Peter Jacobsen | Full Biography and Publications