Friday, March 25, 2011

More Wacky


Again from the Wikipedia Real Business Cycle Theory article:

By eyeballing the data, we can infer several regularities, sometimes called stylized facts. One is persistence. For example, if we take any point in the series above the trend (the x-axis in figure 3), the probability the next period is still above the trend is very high. However, this persistence wears out over time.

nnYeah. And here's what I wrote, back in 1977:

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.

And here's what I said of it later:

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?

"This persistence wears out over time." Isn't that inadequate?

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