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Smile! It just might help the economy

Could contagious happy moods save the economy?
/ Source: The Big Money

Your mother always told you to cover your mouth when you sneeze to prevent others from getting sick. In the age of H1N1, it remains good advice, and reminds us that every mother is an amateur epidemiologist. But if more mothers were amateur economists, they’d probably tell you to cover your mouth when you frown. That’s because doing so could help prevent a recession.

Although human emotions don’t spread quite like colds, they are contagious. And when intense emotions spread rapidly it can contribute to irrational behavior, exaggerating economic highs and lows. An emotional pandemic can blow more air into a bubble, and suck more out during a recession.

“People are mood inductors,” says Wharton professor Sigal Barsade, who was one of the first to study emotional contagion in groups. “We’re social beings, we influence each other.” But, she adds, “We most often don’t realize it’s happening. People are very unaware of where their moods come from.”

Peter Totterdell, a professor at the University of Sheffield in England, says, “If you put two people in a room facing each other, without talking to each other, their moods will converge, or more likely, the mood of the less expressive person will move towards the mood of the more expressive person.”

But it turns out that for emotions to spread, two people don’t have to be in the same room. They don’t even have to know each other. Emotions can be transmitted through mass media and can extend far beyond their originators.

Contagious emotions
In one experiment, team leaders were shown different videos designed to put them in certain moods, then told to lead groups in tasks. The group members ended up in the same moods as the videos that their respective leaders watched, even though the group members themselves never even watched the videos.

And as moods spread, they affect economic behavior. One study showed that if a salesperson in a store smiles at you, you’re likely to stay in the store longer, and spend more money before you leave. In another experiment, people were shown images of smiling or frowning faces too quickly to be consciously processed, then asked to evaluate a beverage. Those who subliminally viewed smiles were willing to pay more for the beverage than those who viewed frowns.

Similar processes take place in the larger marketplace. Studies show that in good times, when an optimistic mood pervades, speculative stocks do best, while in bad times investors' emotions push them to seek greater safety. And preliminary research suggests that the mood reflected in media coverage of the stock market after the closing bell tends to presage stock movement at the next morning’s opening, even when you control for more tangible factors.

“Unquestionably,” Sigal Barsade says, “people’s moods are influencing large-scale systems.”

So exactly how do emotions spread? Why does it happen some times and not others? And by better understanding how it occurs, can we do anything to control it?

Emotional contagion starts with the natural human inclination toward mimicry, which begins in infancy. (If you’ve ever stuck your tongue out at a baby, you understand. You can almost see their brains trying to figure out how to do what you just did.)

“If you’re in a group, cross your arms and see how long it takes other people to mimic that,” Barsade says. “Sometimes it’s conscious, but most often it’s not conscious, it’s automatic.”

After that, in a process called facial feedback, you actually begin to feel the emotion that your face is expressing. In one study, two groups of people were asked to watch cartoons. One group watched normally; the other group watched with pencils in their mouths, thus forcing their faces into something close to a smile. Viewers who were forced to smile found the cartoons to be much funnier than the control group did. In other words, smiling made them happy, instead of the other way around.

In this manner, over time, moods can spread far and wide. A recent study published in the British Medical Journal followed a community for 20 years and found that one’s level of happiness can be affected by people up to three degrees of separation away — your friends’ friends’ friends.

And emotions influence economic behavior in a variety of ways.

The power of a smile
Totterdell explains that when people are in especially good moods — euphoric — they tend to be less analytical and more prone to risk. They also tend to make decisions that will prolong those good moods, like spending more time in a store where a salesperson is smiling and pleasant — or continuing to make profitable but questionable deals instead of raising a red flag with the boss.

So the pre-crash bubble came about in large part because a range of salespeople — from mortgage brokers to Wall Street traders — were essentially doing a whole lot of smiling.

“Bubbles come from a type of emotional contagion,” Barsade explains. “Everyone said, ‘This is great, let’s go buy these houses, let’s do whatever!’ And they didn’t pay enough attention to their personal situations.”

Of course, as Barsade is quick to point out, there were other factors at work as well. The entire global financial system doesn’t end up on the brink of ruin simply because people are smiling a lot. But there’s no question that a certain amount of shared euphoria blinded people at various levels and contributed to the bubble’s growth.

Conversely, when the recession first hit, a pandemic of fear and anxiety was like gasoline on the fiscal fire.

"Early in the crisis, I was very concerned about what the media was doing, by constantly emitting negativity and fear," says Barsade. "It causes people to catch those emotions even more, which amplifies the negativity they may have been feeling individually. This can lead people to be overly fiscally conservative, which enhances a self-fulfilling prophecy of the economy constricting."

Collective anxiety
Several months ago, a couple I know decided not to rent a beach house this summer, even though they were both essentially secure in their jobs. They told me, “It just doesn’t feel like the right time, because of the recession.” Of course that’s their right, but if the mood around them had been different, even if their own circumstances had been the same, it’s quite possible they would have made a different choice.

Barsade hesitates to call such behavior irrational, but does say, “Some people are likely feeling more anxious than they may need to feel, because they’re taking in the anxiety of everyone else.”

This is not to suggest that the recession is simply a media creation or a figment of our imaginations. But it’s no secret that perception affects the economy just as the economy affects perception. Emotional contagion is a driving force in that cycle.

How, then, do you stop yourself from catching a bad bug?

Immunity is impossible, and probably not advisable, since some amount of emotional contagion is integral to social interaction, and may even be the product of evolution. As Peter Totterdell says, “Emotions would serve no purpose if they didn’t help us learn and be attuned to our environment.”

But if you want more control, first know that to catch emotions from certain people, you need to be paying attention to those people, so choosing where you place your attention is key. This also partly explains why you may catch some moods and not others. In general the proximity, intensity, quantity, and salience of an emotion, combined with the charisma of its carrier, will determine how contagious it is.

In the end, though, Barsade believes some awareness of the contagion phenomenon may be most helpful, both for individuals and the economy. “I really do think that while it is an automatic process, to the degree people know that this process exists, that can help to check things and bring them more into balance.” (In other words, if you’re still reading this article, you’ve already taken a step in the right direction.)

“You don’t want people overly exuberant, but you don’t want them overly afraid,” Barsade says. “Ultimately you want people to be able to take in emotions but not be controlled by them.”

So if you really want to provide a little economic stimulus, go find a bunch of people and start smiling at them — calmly. That’s it, nice and easy. We don’t need another bubble on our hands.