The Silver Lining of Recessions: Artists Focus on Creativity Rather than "The Client"

When I was a graduate student, my famous macro teachers would say that a recession is a good time to take a vacation. We laughed but we wondered what the "real unemployed" were doing during recessions. Since the key models featured no geography and zero migration costs across islands (i.e. cities), it was puzzling why anybody was actually unemployed. But in the real world of undiversified local labor markets, home ownership where home prices and wages are positively correlated and social capital and family tying you to a given area (and thus you can't cheaply move to a booming island), we knew that unemployment can happen. As factories close, what happens to the displaced? Derek Neal taught us that they took a big pay cut moving to the low wage service sector. But for those who don't find work, what are they doing? Are they searching? Are they "chilling"? Are they investing in their skills or drinking and smoking and depreciating? Are they starving as they face period by period budget constraints (i.e consumption today = income today) or do they face dynamic PDV budget constraints and are able to take a nice vacation before the economy heats up again?

Today's New York Times hints that artists actually like recessions. During a downturn , there are fewer corporate clients asking the artists to make full sculpture nudes of the CEO of the firm. With the opportunity cost low, artists can focus on their "real passion" and not sell out to the man.

On the environmental front, I hope that firms are thinking about how to reorganize themselves as the next boom starts up and as they anticipate carbon pricing. Such pro-active investments during a downturn would ease the adjustment. Now you might say that they are liquidity constrained and can't make these investments but that is a testable claim.