I was watching “The Big Short” again, I don’t know why I keep putting it on, beyond it is an interesting and well-done movie. It is about the Great Recession, and it’s causes, if you haven’t seen it yet. What are you waiting for go watch it, now!
At one point in the latter half of the movie Brad Pitt’s character Ben Rickert is in Las Vegas with two colleagues who are elated about all the money they are going to make betting that the US economy was in trouble (they bought A+ tranche shorts).
Their bet was against the unacknowledged problem mortgage-backed securities market that would hurt banks and the entire American financial system. They bet well.
Pitt’s Rickert chastises his colleagues for exuberance and states: “Every 1 percent unemployment goes up, 40,000 people die. Did you know that?”
I was curious if the quote was legit or Hollywood fiction?
Well, according to John Crudele of the NY Post the quote was at least close.
According to his article:
The actual figure in academic research is a 37,000 increase for each percentage-point rise in the unemployment rate. It comes from a book called “Corporate Flight: The Causes and Consequences of Economic Dislocation” by Barry Bluestone, Bennett Harrison and Lawrence Baker.
“Corporate Flight” was published in 1982 and mainly had to do with companies moving operations overseas. I couldn’t reach Bluestone, Harrison or Baker, but last week I was able to contact Wade Thomas, who teaches economics and business at SUNY Oneonta and who quoted those figures in his own co-written 2005 book called “Economic Issues Today: Alternative Approaches.”
Here’s the paragraph from Thomas’ book that applies: “According to one study [the one by Bluestone et al.] a 1 percent increase in the unemployment rate will be associated with 37,000 deaths [including 20,000 heart attacks], 920 suicides, 650 homicides, 4,000 state mental hospital admissions and 3,300 state prison admissions.”
I have to admit I am having trouble accepting this. I am aware of people who have been let go (self, friends, family and clients) and their world was devasted, but there were no deaths involved. I was one of the Waste Management purge by USA Waste. I was not aware of any deaths associated with this deal either.