Economists have underplayed the cost to individuals of mild to
severe recessions in part because they have neglected the cost of the
"fear" generated by bad economic times. In his1932 inaugural address in
the midst of the Great Depression Franklin Delano Roosevelt reassured
he American public that the "Only Thing We Have to Fear Is Fear
Itself". In fact they had a lot more to fear, but Roosevelt recognized
the great importance of fear during depressions. In the present crisis
too, consumers and workers have multiple fears due to various kinds of
uncertainty. Homeowners fear that they may lose their homes after
having used most of their savings as down payments on their homes. The
employed fear that they will be laid off, while the unemployed fear
that its duration will be quite long, and that they eventually will
only get jobs that are much inferior to the ones they had...
I tend to agree, which is why I think that regulations that increase unemployment are even worse than they seem - and that "humane" Continental labor market policies are a disaster.