Home > Uncategorized > Stress, a negative externality, is ubiquitous

Stress, a negative externality, is ubiquitous

from John Komlos 

Stress, the body’s biological response to external threats, is generated in the economic system as a negative externality through countless pathways, that include long working hours, being underpaid, being evicted, income insecurity, unhealthy work environments, tight deadlines, being fired, long spells of unemployment, underemployment, low income relative to the median, reduction of earnings, unexpected medical expenses, college tuition, being victim of predatory loans, financial pressure, inadequate work-life balance, being underinsured, excessive child-care costs, inflation, incarceration, and inadequate government safety net programs, to name some contributing factors.

The relevant literature is humongous: a search of the National Library of Medicine (PubMed) and of the IDEAS/REPEC websites found tens of thousands of articles in which stress and an economically relevant descriptor were both either in the title or in the abstract (Table 1). That these studies have increased exponentially in the 21st century is indicative of the increasing significance of this phenomenon. For instance, in the year 2000 there were 630 articles with “work” and “stress” in the title or abstract in the PubMed website while there were 4,986, or eight times as many (per annum) even before the Covid pandemic. In 2021 there were 7,299. This pattern obtained for all other keyword pairs investigated.

Table 1: The number of articles found in two databases with relevant keywords 





Found in

Found in

Stress & …

the Title

the Abstract

the Title

the Abstract











Mental Health















































Date of search: June 10, 2022


Note: PubMed searches also include Economy, Finance, Finances.

Both searches included Unemployed and Race.

a) Ideas/repec database had too many studies about “stress testing banks”  to be included.


No wonder that in an era characterized by mass shootings, deaths of despair, the rise of populism, declining labor’s share, stagnating wages for those without a college education, and a mental health crisis, stress would appear on our radar screen (Case and Deaton 2020; Sandel 2018; St. Louis Fed series LABSHPUSA156NRUG). Men in the U.S. without college in 2021 were earning about $2/hour less than they did in 1973 (EPI 2022). Inadequate financial cushion to face an unexpected economic downturn also increases stress within the household (Board of Governors 2019; Financial Health Network 2019). Moreover, 40 percent of Americans evaluate their lives as “struggling” and another 3.5 percent evaluate it as “suffering” (Gallup 2022). So, stress is ubiquitous.

“Stress represents the main environmental risk factor for mental illness” (Cattaneo and Riva 2016). A mental illness is defined as an episode of behavioral or emotional distress, impairment in functioning, or behavioral or psychological dysfunction (SAMSHA 2020, Appendix A).[1] These are diagnosed cases of depression, bipolar disorder, phobia, anxiety disorder, panic, obsessive-compulsive disorder, posttraumatic stress, anorexia nervosa, hallucinations, delusions, or suicidal thoughts, but do not include substance use disorders (SAMSHA 2020, Appendix A).

Forty million adults experienced a mental illness episode in 2008 while in 2019 their number rose to 51 million, an increase of 29% (SAMSHA 2020, Table 10.1A). That implies that 20% of adults suffer from an episode of mental illness annually. The increase in young adults between the ages of 18 and 25 was especially large. Their incidence increased in the interim 11 years by 63% (SAMSHA 2020, Table 10.1B). This high incidence indicates the fragile mental condition of the population.

A major pre-Covid study summarized these complex issues succinctly by concluding that “stress about money and finances is prevalent nationwide…” and added: “Nearly threequarters (72 percent) of adults report feeling stressed about money at least some of the time and nearly one quarter say that they experience extreme stress about money… during the past month… In some cases, people are even putting their health care needs on hold because of financial concerns” (American Psychological Association 2015, p. 2).

Poverty has also been linked directly to mental illness. “Children from impoverished families are more prone to mental illness… Poverty brings with it a number of different stressors, such as poor nutrition, increased prevalence of smoking and the general struggle of trying to get by. All of these can affect a child’s development, particularly in the brain, where the structure of areas involved in response to stress and decision-making have been linked to low socioeconomic status” (Reardon 2016; Swartz, Hariri, and Williamson 2017). No wonder that poor children generally underperform in school (Heckman 2006). Thus, the increase in mental illness is indicative of the increased stress experienced by the U.S. population.

In other words, most of stress is related directly or indirectly to financial pressure (Brzozowski and Visano 2020; Friedline, Chen, and Morrow 2021; Wilkinson 2016). Stress is not a choice variable. It is a negative externality mostly imposed on the individual by the economic system, like the financial crisis or the federal minimum wage which is $5 less in real terms than it was in 1968. Alternatively, it can also be a consequence of individual action that fails to take the long-term effects of stress into consideration. This can occur because the biological effects of stress are both uncertain and take decades to materialize. Hyperbolic discounting may make it desirable to work instead of taking a half-day off in order to go to the doctor but over an extended period of time such myopic decisions impact the biological system (Laibson 1998). Furthermore, financial considerations forced many low-income essential workers to work even during the Covid lockdown, generating stress in the process. So, stress is not a variable people consciously choose.

read more: http://www.paecon.net/PAEReview/issue101/Komlos101.pdf

  1. deshoebox
    December 7, 2022 at 12:07 pm

    If you are not familiar with the work of Gabor Mate, a Hungarian-born physician who worked for many years with the most vulnerable people in Vancouver, B. C., I recommend his work on the subject of stress and its effects: When the Body Says No. Of course stress is not consciously chosen, but it is unavoidable for many people in an economic system which creates and worsens poverty and inequality for tens of millions of families, a system which intentionally generates ever-new incentives for over-spending on useless novelties and which fails to provide for the necessities of life such as affordable health care, education, old-age security, and leisure for the many life-supporting non-paying activities that people need.

  2. Steven Klees
    December 11, 2022 at 5:18 pm

    What are the implications of stress being a negative externality through “countless pathways?” Each of those pathways therefore represent an economic activity that needs government intervention
    because the impact of stress is creating massive disutility and an economic system that is Pareto inefficient along multiple dimensions. The neoliberal belief that externalities are not substantial enough to justify intervention is simply not true. Neoclassical economics falls apart in so many ways, the major presence of externalities everywhere being one of them. It also makes me think of Dani Rodrik’s argument that creating good jobs yields massive positive externalities, implying that the government should be extensively involved in making that happen. Neoclassical economics is a house of cards that falls of its own weight if closely examined.
    Steve Klees, University of Maryland

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