Larry Summers ponders the obvious: But is it possible that cyclical (demand) shocks can have permanent effects through hysteresis effects? The presence of hysteresis was originally discussed in the context of labour markets. Blanchard and Summers (1986) argued that cyclical unemployment could turn into long-term unemployment or that unemployed workers could lose some of their skills, making a cyclical shock persistent or even permanent. But we can also think about a broader concept of hysteresis, one that includes the effects on productivity and capital accumulation dynamics and establishes a much stronger connection between economic crises and long-term growth trends.
Aggregate motion causes radiation, to put it in general terms. Or, entropy is always increasing. Or, if you go there and back, you pay a redundant gas fee.
The question is why have economists ever thought otherwise. I could post any chart from Fred and it will show recessions occurring, since 1980, at every presidential regime change. Clearly, proof positive that the Swamp is intimately involved with cycles the economy.
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