Editing Recession (section)

===Psychological aspects===

Recessions have psychological and confidence aspects. For example, if companies expect economic activity to slow, they may reduce employment levels and save [[money]] rather than invest. Such expectations can create a self-reinforcing downward cycle, bringing about or worsening a recession.<ref>{{cite news |author=Samuelson, Robert J. |url=https://www.washingtonpost.com/wp-dyn/content/article/2010/06/13/AR2010061303330.html |title=Our economy's crisis of confidence |newspaper=The Washington Post |date=14 June 2010 |access-date=29 January 2011 |archive-date=26 March 2020 |archive-url=https://web.archive.org/web/20200326123628/https://www.washingtonpost.com/wp-dyn/content/article/2010/06/13/AR2010061303330.html |url-status=live }}</ref> Consumer confidence is one measure used to evaluate economic sentiment.<ref>{{cite web |url=http://www.conference-board.org/economics/consumerconfidence.cfm |title=The Conference Board – Consumer Confidence Survey Press Release – May 2010 |publisher=Conference-board.org |date=25 March 2010 |access-date=29 January 2011 |archive-date=3 March 2020 |archive-url=https://web.archive.org/web/20200303205552/https://www.conference-board.org/economics/ConsumerConfidence.cfm |url-status=live }}</ref> The term [[Animal spirits (Keynes)|animal spirits]] has been used to describe the [[psychological]] factors underlying economic activity. Keynes, in his ''[[The General Theory of Employment, Interest and Money]]'', was the first economist to claim that such emotional mindsets significantly affect the economy.<ref name="AkerlofShiller2010">{{cite book |last1=Akerlof |first1=George A. |last2=Shiller |first2=Robert J. |title=Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism |date=2010 |publisher=Princeton University Press |isbn=978-1-4008-3472-3 |page=23 |url=https://books.google.com/books?id=2Rz_cuu88DwC&pg=PR23}}</ref> Economist [[Robert J. Shiller]] wrote that the term "refers also to the sense of trust we have in each other, our sense of fairness in economic dealings, and our sense of the extent of corruption and bad faith. When animal spirits are on ebb, consumers do not want to spend and businesses do not want to make capital expenditures or hire people."<ref>{{cite news |last=Shiller |first=Robert J. |url=https://www.wsj.com/articles/SB123302080925418107 |title=Animal Spirits Depend on Trust |work=The Wall Street Journal |date=27 January 2009 |access-date=29 January 2011 |archive-date=11 February 2020 |archive-url=https://web.archive.org/web/20200211024623/https://www.wsj.com/articles/SB123302080925418107 |url-status=live }}</ref>
Behavioral economics has also explained many psychological biases that may trigger a recession including the [[availability heuristic]], the [[money illusion]], and [[normalcy bias]].<ref>{{Cite web|url=https://medium.com/@how.to.be.an.adult.01/biases-and-errors-that-led-to-historic-bubbles-and-crashes-52df73cf44f|title=Psychological Biases and Errors that led to historic bubbles and crashes|author=How to be an Adult|date=13 May 2020|website=Medium|access-date=13 May 2020|archive-date=28 July 2020|archive-url=https://web.archive.org/web/20200728104134/https://medium.com/@how.to.be.an.adult.01/biases-and-errors-that-led-to-historic-bubbles-and-crashes-52df73cf44f|url-status=live}}</ref>