Dr. Horowitz Discusses Psychology and the Economy at Niagara Foundation
On January 27, Chicago School President Michael Horowitz spoke on the
timely issue of psychology and the economy as part of the Niagara
Foundation’s monthly speaker series.
Dr. Horowitz joins a long list of distinguished leaders in academia,
government, media, and business invited to address the forum. Past
speakers include Gov. Pat Quinn, Sec. of Education Arne Duncan, and
Chicago Police Superintendent Jody Weiss. Click here to learn more about the foundation. To follow is a transcript of President Horowitz’s remarks as written.
President Michael Horowitz
Niagara Foundation Speech, January 27, 2009
Psychology and the Economy
Welcome and Thank You
Mr. Cinar, friends at the Niagara Foundation, thank you for this kind
invitation. I see from the Niagara Foundation website that I am the
latest in a long line of local university presidents invited to speak
before this group. It’s an honor.
I would like to begin with just a few words about The Chicago School of
Professional Psychology. We are entering our 30th year as a private
graduate university dedicated to psychology and behavioral science and
hold the distinction of being the largest institution of our kind in
the world. From the year 2000 we have grown from a student population
of approximately 200 all in Chicago to well over 2,500 studying in five
locations in Chicagoland, Southern California, and online. We have
become a major force in professional psychology education in this
country. We train hundreds of psychology professionals each year who
provide critical services to populations and organizations in need.
While many go into private practice—think the old Bob Newhart Show
based here in Chicago—a great number of our alumni, faculty, and
current students work in settings such as schools, service agencies,
hospitals, courts and prisons, businesses, and more. Our values of
education, innovation, service, and community reside in the core of our
mission. Just last year alone, Chicago School students and faculty
provided more than 600,000 hours of psychology services to the
Chicagoland region. We estimate the dollar amount of this pro bono and
low-cost service to exceed $24 million.
I admire the Niagara Foundation’s mission of humanity, tolerance,
respect, compassion. The Chicago School shares this vision of hope and
recognition of the importance of understanding and embracing
differences. Ask anybody who has heard of us what makes The Chicago
School different, and they will likely say that it’s our commitment to
diversity and multicultural education. It’s in our DNA as an
institution, a tradition set forth three decades ago when our founders
sought to create a school that was different; one that recognized that
to best help those in need, you must understand culturally where they
are coming from. We carry on this tradition today. For instance, just
last fall we formally introduced our new Center for Latino Mental
Health, which provides a vital service of research and community
engagement, while opening the pipeline for more individuals trained
with the cultural competency needed to work with this nation’s
The center is one of many at The Chicago School. Our oldest and largest
is the Center for Diversity and Multicultural Studies, which helps us
understand the latest trends and research in the field, while
connecting our students with cultural and volunteer opportunities in
the surrounding neighborhoods. Our Center for International Studies
provides like services with a global perspective.
The more we reach into our communities, the more we see the necessity
for psychology. I think we can all agree that this need is sure to grow
in the coming months. Two-thousand eight was a tough year, and if you
listen to the words of most pundits and analysts, times will darken
before they get better. If economic turbulence hasn’t touched you yet
it likely will directly or indirectly. It could be in the form of
negatives on a financial statement, a missed bonus, hiring freeze, or
the layoff of a loved one.
What I’m going to talk about for the next few minutes is the broad
question of how are people coping? How can the science and practice of
psychology help us understand what we are facing?
I would like to begin this probe by reading two news accounts about the
economy. They could have appeared in any paper but these two ran in The New York Times.
“The economic problems in Connecticut are real enough. Housing prices
have plummeted. Office buildings stand empty. Layoffs have become
common … Consequently, many people have become unusually gloomy, said a
variety of watchers of the public mood. Mental health professionals
said that financial problems were leading to symptoms like low
self-esteem, anger, addictive behavior and lack of concentration."
I’ll read just a quote from the second piece. ''The stress on American
families now is of a different order than ever before,'' said Dr. M.
Harvey Brenner, an economist and medical sociologist at Johns Hopkins
University. ''Their psychic pain is worse than that of families in the
Depression or in the time of the Industrial Revolution …''
If you’re an avid New York Times reader you might be
asking yourself, “odd, I don’t recall those stories.” That is because
the first one was filed by reporter Andi Reirden on February 17, 1991,
and the second one by writer Glenn Collins on October 14, 1982. The
significance of those two dates is they land squarely within two
previous recessions that have occurred in our lifetime.
I lead with these accounts to make a point: we must not lose
perspective. Economic turmoil has occurred before and it will happen
again. It’s an unfortunate example of how events recycle themselves.
What is fortunate though about past economic downturns, especially
those that occurred more than a decade ago, is they help us to make
sense of what we see today. Past events also serve as a crystal ball
for what we might be seeing in the future. Human beings resist learning
the lessons of history but psychology suggests to us that the effort
will be worthwhile.
I would like to pose a question to all of you. As a result of the
current economic downturn, do you think that divorce rates are on the
rise or are they falling?
Show of hands, how many of you think that divorce rates will rise? How many of you think they will fall?
The answer is complicated. Google “divorce” and “economy” and you’ll
likely find one news story reporting that they are trending upwards
followed by a contradictory news account with sources declaring that
families are staying together now more than in the past.
It’s not hard to bridge psychology to the rise theory. We know through
psychology research that money is a stressor on relationships. As
income and finances weaken, stress for many rises, which unfortunately
can serve as a breaking point for some unions teetering on the edge.
However, elements of psychology, economics, and sociology can also be
leveraged to make a case for the counter, the holding steady or even
falling theory for divorce rates.
Because we are still in the early stages of this recession, often only
anecdotal evidence is used to shape this conversation. Take the
December 30, 2008, New York Times
story for instance. Titled “Breaking Up is Harder to Do after Housing
Fall,” reporter John Leland finds testimony from couples and legal
sources showing that the reality of tough economic times, particularly
as it relates to falling home prices, is forcing the hands of troubled
spouses back together. I’ll share my favorite quotation from the piece.
“We used to fight about who gets to keep the house,” said Gary
Nickelson, president of the American Academy of Matrimonial Lawyers.
”Now we fight about who gets stuck with the dead cow.”
Does this myopic account offer any insight? Perhaps. It represents a
unique example of how people are forced to cope. I can see why the Times
ran the story, but from reading the acidic tone of quotations from the
profiled couple, I can’t help but wonder about the fate of their
marriage once the financial terms are resolved. I wish them all the
best. If their story was a Hollywood movie, we know that the couple
would of course find love again all would be well. But as we all know,
the way things are and ought to be are often out of alignment.
You may ask, “Can’t this divorce question be settled by looking at the
numbers?” It can to an extent. Again, history—not to mention the good
people at the Census Bureau—acts as our guide. Trends show that divorce
rates do fluctuate with economic cycles and appear to dip along with a
down economy. We saw this in the Great Depression and during recession
cycles in the ‘80s and ‘90s. The theory is that when there is a
shortage of jobs combined with high housing costs, divorce becomes more
of a luxury.
Let me turn to another psychological question that draws a constant
stream of new thinking and seemingly contradictory analysis. “Can money
buy happiness?” Again, I invite you to Google this question at your
leisure. Like divorce, you will see news accounts and fresh research
that spins the theory in circles. The answers, depending on the source,
can be maddening: “yes,” “no,” “sometimes,” “it depends,” and on.
A classic in social science research on this topic is economist Richard
Easterlin’s 1974 paper, published while he was at the University of
Pennsylvania. In it Easterlin looked at the post-World War II Japanese
economy, which experienced one of the fastest and most explosive surges
in world history. Average per-person economic output grew more than
seven-fold from 1950 to 1970. In this short 20 year span, people’s
fortunes turned from poverty for many to strong financial stability.
Did collective happiness though keep up with the absolute income of the
nation? In what has since been labeled the “Easterlin paradox,” the
study did not find this to be the case. In fact, Easterlin discovered
that the percentage of people giving the most positive answers for life
satisfaction was higher in the early 1950s than it was than in the
early 1970s. What Easterlin concluded was that while people did become
happier once basic necessities were met, as was the case in the early
‘50s, this trend did not continue with further economic gains.
Easterlin’s study continues to be a fixture in literature reviews of
new thinking on this topic. But his work is beginning to be challenged.
Two University of Pennsylvania economists, Betsey Stevenson and Justin
Wolfers, presented a new paper last spring with a central argument that
absolute income does matter. In it, they aggregated Gallup polling from
around the world on the indicator of life satisfaction, which they
found to be highest in the richest countries.
While this debate continues, other studies have looked at this dynamic
on the individual level as it relates to surges in income and material
possessions. Lottery winners, for instance, have been shown to
eventually return to their pervious level of happiness after a few
years. Big-ticket luxury items such as sports cars and giant
televisions might give you a boost of happiness, but it eventually
fades away as the newer, faster car or even larger television makes
your former prize lose its luster. The brain has a way of becoming
conditioned to experiences. I give you $1 million tomorrow and you’re
happy, ecstatic. I give you $1 million everyday for a year and it will
eventually become routine. People can get used to anything, good and
Where do I stand? I can assure you that poverty is extraordinarily
difficult and so a certain level of economic success is necessary to
mitigate the stress associated with struggling for basic necessities
such as food and housing. In my clinical experience, however, I have
found that among my upper-income and middle-class clients, and these
designations are often subjective, increasing income is not at all
linked with what I would term life satisfaction or happiness. Work
satisfaction, family relationships, and purpose often trump income and
I’ve talked about psychological effects of one’s journey up the
financial coaster, but what about the ride down? What about the
long-term consequences of a sour economy?
While the relationship between economic adversity and mental health is
complex, I can say—with numbers to support the claim—that there is a
cause and effect at work as it relates to perceived happiness. When
jobs and income are lost, one’s subjective well-being drops with it.
The Gallup-Healthways Well-Being Index, which has been billed as the
Dow Jones of health, is a daily report on people’s well being. Just
like the Dow, it closes every day either up or down. If you look at the
numbers for 2008 the narrative is there. The “struggling” index went up
and the “thriving” index went down as the year progressed. In the
Stevenson-Wolfers paper that I mentioned before, they tracked a
happiness index through the past 40 years. The low points on the grid
occurred around 1973, 1982, 1992, and 2001. See a trend here? Each year
was at the center of an economic recession.
While I recognize that that this recession is different than those
occurring in the past four decades, these past events can give us clues
to the psychological effects of this economy long term.
A fascinating study began in 1989 by two psychologists: Dr. Rand Conger
at the University of Iowa and Dr. Glen Elder Jr. at UNC Chapel Hill.
Called the Iowa Youth and Families Project, Gonger and Elder started
tracking 500 Americans every year who were deeply affected by the farm
crisis of the 1980s. They published their initial research in a 1994
book titled “Families in Troubled Times: Adapting to Change in Rural
What the scholars found was that many families as a collective entered
a downward spiral as their troubles deepened. When income and security
went down, stressors mounted as people were suddenly faced with such
daunting prospects as having to relocate to find work or leave their
homes to move in with relatives. Children of course were not immune.
Classic nag and withdraw syndromes between family members became more
common. Mothers began to snap more, fathers turned irritable, each
action serving to heighten anxiety among their children. What makes
Conger and Elder’s work even more invaluable is the longitudinal nature
of the study. Those children from the late ‘80s are now in their 30s.
We can see how they turned out.
What Conger and Elder found is troubling but not surprising. Children
from the hardest hit and least resilient families, on average, suffered
academically, socially, and psychologically throughout adolescence and
early adulthood. A vicious cycle can be found among many of them. Those
who lacked parental support wallowed in their studies. In turn, a lack
of academic success resulted in less rewarding and lucrative careers.
What they found from many of their subjects was that the children
didn’t mind not having as much stuff, material possessions, it was
their parents’ actions such as anger and withdrawal, that affected them
the most. The more these behaviors were evident in the household, the
more they were affected, and the more likely the vicious cycle to
I’ll end my remarks today in a land that was home to perhaps the most
melancholy character in literary history, Shakespeare’s Hamlet, the
Prince of Denmark. In 2006, Adrian White, an analytic social
psychologist at the University of Leicester, published the first ever
World Map of Happiness, a global projection of international
differences in subjective well-being. That year, the United States just
missed the top 20, coming in at No. 23. It was bested by the likes of
Costa Rica, Canada, and Bhutan. No. 1 on the list, Denmark. How can
this be? Denmark isn’t the wealthiest country, nor the healthiest. It
doesn’t win many medals in the Olympics. Its national soccer team is
good but no World Cups yet, and you will not find any tropical weather
along its ragged coast.
60 Minutes reported on this curiosity last year. One of the interview
subjects was University of South Denmark Professor Kaare Christensen,
the author of a study titled “Why Danes are Smug.” In it, Professor
Christiensen found evidence pointing to a Danish culture of
complacency. Put simply, they are content. Their expectations are what
they are. “Waste not, want not” as Franklin would say. They are a
people that feel safe. Crime is low. Secure. Medical coverage and
education, including higher education, is free, paid for by the
government. They don’t live in a culture of want and excess.
I think we all can agree that there are plenty of lessons to be learned
by looking at this small Scandinavian country of five and a half
million people. I can speak for many other psychologists by saying that
emotional strength can be found in having realistic expectations. We
can have a lot in this country but we cannot have it all. I’ll say it
again: every dollar accumulated beyond your basic needs adds neither an
IQ point, nor a point to your happiness quotient.
I’ll leave you with four thoughts on how psychology can help all of us in times of economic turbulence.
No. 1: It’s time to restore rational thinking to our economic behavior.
We got into this mess in part because investors were taking greater and
greater risks based on shaky trends while bearing the weight of
expectations for lofty returns beyond anything that was sustainable in
the long term. We live in a business climate where individuals are
praised for promising and reaching soaring profit margins, not in the
long term, but right now. If you can’t do it, we’ll find someone else
who can. Basic psychology is at play here. As pressure mounts, good
decision-making is affected. As recent events have shown, some of our
brightest business minds were not immune to this reality.
No. 2: People for the most part are resilient. It takes time but it’s
true. I’ve seen this in my clinical work and my students face it
everyday working in the community. I’ll again mention the
Stevenson-Wolfers study that tracked domestic happiness for the past 40
years. What goes down must come up. For every regression in times of
recession, higher levels of happiness were eventually realized. There
are those though who need a hand rebounding, particularly children.
Remember the lessons for the Conger and Elder study. It’s like a
seedling that has weathered a harsh storm. Sometimes it needs help and
nurturing to prop it back up to face the sun again. Psychologists do
work like this everyday. Not with trees, of course, but with people.
No. 3: Let’s not lose perspective. It’s not uncommon for people to
think that the times they live in are gloomier than ever faced. There
might be a light at the end of the tunnel, but for some, it’s a
locomotive light racing toward them with nowhere to run. I’ll speak on
behalf of my profession to say that psychologists are here to help
people and families work through these issues.
While the United States may have not have breached the top 10 on the
international happiness index, times could be worse. In Haiti for
instance, the average person lives on less than $300 a year. Half of
the world’s population, according to our standards, is technically
unemployed. These are the people who are most affected by a crippled
economy, because their basic needs are not being met. Plus, they are
more likely to live in regions of conflict and with no basic safety net
when natural disasters strike. Being born in a country like ours is
like hitting a health and well-being lottery.
And No. 4: Remember that we’re not alone. Our community is there for
us. Positives can be found in the most stressful of conditions. History
has shown us again and again that people come together in times of
peril. It happened in the Great Depression. It happened in World War
II. It happened after 9/11. This is actually a good thing, a positive
residue of what we are facing. Strong and active communities equal
happier communities. The Conger and Elder study showed evidence that
strong family units with supportive parents were more successful
weathering the farm crisis. Ask those who remember the Great
Depression. They found solace not in getting the newest gadget or
fanciest car, but in coming together. They joined Elks Lodges, Eastern
Star orders, and bowling leagues. They got involved. There are plenty
of surveys showing that people who volunteer in their communities find
a strong sense of fulfillment—the kind of satisfaction that money
I’ll make a plug in closing to say that in the coming years we’ll need
more psychology professionals and more professionals of all kinds using
psychology in order to advance our economy and society, a challenge
that The Chicago School is working to address.