Economic Truth and Consequences

The latest edition of The Economist has an article about the duration of financial crises, which includes the summary table shown below.

The source material is a recent paper (pdf) called "The Aftermath of Financial Crises" by two economists (Carmen M. Reinhart and Kenneth S. Rogoff) who studied other financial dysfunctions and sought to divine what that means for the current situation.

This looks grim. If the past is any indication of the future (we're ironically assured the contrary on every financial prospectus), we can expect several more years of declining confidence, and hence performance. This is the placebo effect in reverse. With trustful relationships in tatters, the masses become conservative with financial transactions, which benefits them individually but to the detriment of the collective--a classic prisoner's dilemma situation. So what to do?

I figure if fear is ubiquitous, the thing to do is sell hope, and this is especially true of higher education. Here are some ideas.

• Emphasize outcomes that applicants care about, like jobs.
  
• Create new kinds of degrees that correspond to new careers
• Defer some costs until graduates are established
• Use work-study to immediately engage students
• Provide transparency about costs, so students see benefits
• Sell the liberal arts as flexibility and adaptability in an uncertain world
• Hire more graduates at the institution: begin to emulate the medieval model of a self-sufficient institution (okay, a monastery)
  
• Plan carefully for the next few years in order to be pro-active rather than reactive to restricted budgets. Use scenario planning.
• Be sure your tuition and financial aid policies put you at the right price point so you can reach the most students (and generate the revenue to educate them).

In Money, John Kenneth Galbraith's history of the stuff, he claims that panics were eventually renamed 'depressions' to seem less intimidating. Then 'recession' was needed to replace depression after the 1930s. At least 'panic' was honest. The message for ourselves and our consituents is the same as Douglas Adams': don't panic. That sounds a lot more reasonable than "don't recess."