People usually think recessions are bad. Are they in fact necessary? Akin to naturally occurring small forest fires…those are good otherwise there could be a mega fire.
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I don’t think they are necessary, but the way our government/politics works they are inevitable.
A government will always chose to have a fast expansion period because it produces wealth in the medium term, so for whoever is holding an elected position it will be positive even though this will result in a recession in the future (another person will have to deal with it).
So instead of having an average steady growth for many years, we(government) will chose to have a fast burst of growth followed by a period negative growth to average things out. So it is not really a bug but a feature.
The thing is, these are policies and economic structures that we’ve built for ourselves. We have massive influence on every variable involved in the economy so, in essence, it’s not really NECESSARY to avoid a future disaster to have a recession because we’re making up the rules.
In nature, yes smaller fires can help stop a large inferno from doing even more damage but those are mechanisms developed over millions of years and in specific regional and climate circumstances. The situation can change drastically with no influence from the trees or the brush. Nature doesn’t really care, it just does. We do care, and we’ve crafted a system tailored to what we care about most, so our flaws are all over how we run things for ourselves.
They’re only necessary if other things make them necessary. Like in your example, too much brush builds up in the forest. And in the stock market example, after a long period of zero interest rates, a lot of wasteful companies appeared and didn’t actually produce anything. And the economy will be healthier if they are killed off in this cycle.
Of course, if you have a very healthy forest where brush doesn’t build up, you would plausibly not need fires. And if you had a perfectly healthy economy where wasteful companies didn’t appear, then we wouldn’t need recessions to get rid of them. Nature is healing, reversion to the mean.
There’s nothing healthy in modern economy. It just is as it is, and it’s crappy setup, but what had evolved.
They’re only necessary if other things make them necessary. Like in your example, too much brush builds up in the forest. And in the stock market example, after a long period of zero interest rates, a lot of wasteful companies appeared and didn’t actually produce anything. And the economy will be healthier if they are killed off in this cycle.
Of course, if you have a very healthy forest where brush doesn’t build up, you would plausibly not need fires. And if you had a perfectly healthy economy where wasteful companies didn’t appear, then we wouldn’t need recessions to get rid of them. Nature is healing, reversion to the mean.
They’re only necessary if other things make them necessary. Like in your example, too much brush builds up in the forest. And in the stock market example, after a long period of zero interest rates, a lot of wasteful companies appeared and didn’t actually produce anything. And the economy will be healthier if they are killed off in this cycle.
Of course, if you have a very healthy forest where brush doesn’t build up, you would plausibly not need fires. And if you had a perfectly healthy economy where wasteful companies didn’t appear, then we wouldn’t need recessions to get rid of them. Nature is healing, reversion to the mean.
There’s nothing healthy in modern economy. It just is as it is, and it’s crappy setup, but what had evolved.
The modern economic order has only really existed since the 1940s or so, and much of the reforms that followed the Great Depression and World War II were only slowly put in place until the 1970s, so there’s no a lot of evidence to really be entirely sure if growth/recession cycles are actually necessary.
What we do know for sure, though, is that modern economies, recessions and all, are still incredibly better for the average normal person than the previous economic order. Even the very worst economic swings of the past 70 years have been just a drop in the bucket compared to the absolutely country-wrecking effects of the Great Depression or any number of other previous economic crises across Europe.
To adapt a quote about democracy: “Everyone knows it’s the worst economic system, except for all those other economic systems that have been tried from time to time.”
There’s nothing healthy in modern economy. It just is as it is, and it’s crappy setup, but what had evolved.
The modern economic order has only really existed since the 1940s or so, and much of the reforms that followed the Great Depression and World War II were only slowly put in place until the 1970s, so there’s no a lot of evidence to really be entirely sure if growth/recession cycles are actually necessary.
What we do know for sure, though, is that modern economies, recessions and all, are still incredibly better for the average normal person than the previous economic order. Even the very worst economic swings of the past 70 years have been just a drop in the bucket compared to the absolutely country-wrecking effects of the Great Depression or any number of other previous economic crises across Europe.
To adapt a quote about democracy: “Everyone knows it’s the worst economic system, except for all those other economic systems that have been tried from time to time.”
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