Back in 1977 I wrote a little book on the economy called Small Change. In it I wrote:
For an economy, good times mean growth: a better standard of living; more jobs, more productivity, more money to spend. But often, one side effect of the good times is rising prices -- inflation.
According to the theory, after the good times have lasted a while, inflation and other factors may begin to weaken the economy's growth. Eventually, conditions get bad enough that the economy begins to shrink. The result is a recession....
Things eventually get so bad that they 'can't get any worse,' and then the economy begins to grow again. Thus the pattern the economy weaves is a cycle of growth and recession.
Enough.
So in 1977 I thought that time, inflation, and other were the factors that cause recession. And that time and lousy conditions are the factors that restore growth.
Isn't that inadequate? I think so, now. But a lot of economics is empty like that.
From The Economist:
ReplyDelete"... Hyman Minsky’s hypothesis that booms sow the seeds of busts"
Probably not Minsky, but somebody at The Economist who loves the empty argument.