span lifetimes. Financial panic came first, followed by narratives about crisis in
business confidence, followed by narratives of a crisis in consumer confidence.
As narratives spread about the dangers of business losses and decreased
consumer confidence, increasing self-censorship of narratives may, and
sometimes does, encourage panic. Because people are aware that others self-
censor, they increasingly try to read between the lines of public pronouncements
to determine the “truth.”
Broad public interest in the idea that financial events might be related to
psychology began in the early nineteenth century, continued after the panic of
1857 in the run-up to the US Civil War, and then grew over the decades. The
phrase financial panic peaks on Google Ngrams in 1910, three years after the
famous Panic of 1907. The financial panic epidemic was part of a narrative
constellation that grew with it. Individual panics ebbed and flowed within the
narrative constellation. A particularly strong narrative of the Panic of 1907
involved a celebrity—J. P. Morgan, the most prominent banker in the United
States at the time—which made it last for decades. It stands out in Figure 10.1 as
the highest point for public attention to financial panics.
Figure 10.2 shows the major US financial panics individually. For example,
the panic of 1857 was mostly forgotten within a few years. It later returned as
part of a narrative constellation about other panics. During the 1857 financial
panic, news reports covered objective events like bankruptcies, bank runs, and
suspensions, but they also referred to rumors and emotions. An 1857 newspaper
article summarized the panic of that year:
Brokers and others are highly excited, and circulate monstrous reports.… The
general disturbance of the public mind makes it impossible to treat the subject
coolly, or ascertain the views of the most reliable persons in the business
community.2
We must reflect on the prevailing nineteenth-century narratives, and
associated views of the world, to understand why people and newspapers spoke
of “panics” rather than “depressions” (in the modern sense of the word) and why
they never spoke of consumer confidence. Contemporary narratives about
financial panics mostly were viewed as stories about wealthy, pretentious people
who had bank accounts and who perhaps deserved some of the disruption caused
by a financial panic and its associated “depression of trade.” In the eighteenth

and nineteenth centuries, most people did not save at all, except maybe for some
coins hidden under a mattress or in a crack in a wall. In economic terms, the
Keynesian marginal propensity to consume out of additional income was close to
100%. That is, most people, except for people with high incomes, spent their
entire income. So, to the spinners of narratives of these past centuries, there
would have been no point in surveying ordinary people about their consumer
confidence.
FIGURE 10.1. Frequency of Appearance of Financial Panic, Business Confidence, and Consumer Confidence
in Books, 1800–2008
The figure shows three separate recurrences of the confidence narrative, but referring to different sectors,
finance, business, and consumer. Source: Google Ngrams, no smoothing.
Most people then had no concept of retirement or sending their children to
college, so they had no motivation to save toward these goals.3 If they became
bedridden in old age, they expected to be cared for by family or by a local
church or charity. Life expectancy was short, and medical care was not
expensive. People tended to see poverty as a symptom of moral degradation and
drunkenness or dipsomania (now called alcoholism), not as a condition related to
the strength of the economy. So there was practically no thought that consumer
confidence should be bolstered. The people saw the authorities as responsible for