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Friday, August 24, 2018

Hysteresis: Some Fairly-Recent Must- and Should-Reads [feedly]

From Brad Delong's Blog: There is a lot in the economic press now about the lagging effects of structural changes in labor force patterns during and following the Great Recession (2007).  Economists apply the term "hysteresis" --  the dependence of the state of a system on its history -- to this phenomenon.  

The literature reveals rapid redefinitions of important terms like "unemployment", "natural rate of interest" (it went negative!), the manufacturing -- services distinctions and classifications, "human capital", "public goods", "intangibles", and more take. The debates and discussions reflect the mounting data detailing the multifaceted pressures of Globalization and automation at work in nearly every economic sphere.

Hysteresis: Some Fairly-Recent Must- and Should-Reads

  • The empirical studies are finding more and more hysteresis—more hysteresis in the sense of a persistent downward shadow cast by a recession than I would have believed likely. I keep hunting for something wrong with these studies. But there are too many of them. And they all—at least all those published that cross my desk—point in the same direction: Karl Walentin and Andreas WestermarkStabilising the real economy increases average output: "DeLong and Summers (1989)... argue that (demand) stabilisation policies can affect the mean level of output and unemployment...

  • As Chief Acolyte of the "hysteresis view", I must protest! The "hysteresis view" has proved correct: Benoît CœuréScars that never were?: Potential output and slack after the crisis: "To be clear... I do believe that deep recessions can have effects on the supply capacity of the economy that may take some time to unwind...

  • We are not yet at maximum feasible employment: Jared BernsteinEmployment Breakeven Levels: They're higher than most of us thought: "We know neither the natural rate of unemployment nor the potential level of GDP...

 -- via my feedly newsfeed

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