Source: Fortune
Summary
According to Tyler Goodspeed, chief economist at ExxonMobil and former acting chair of the Council of Economic Advisers, recessions are not cycles, but rather random events caused by massive shocks, primarily to energy and from war. Goodspeed’s book, “Recession: The Real Reasons Economies Shrink and What to Do About It”, argues that the idea of predictable waves of economic expansion and contraction is a myth. Instead, he found that recessions are often triggered by unforeseen events, such as the 2008 oil price spike or the 9/11 attacks. Goodspeed also challenges the notion of “creative destruction”, arguing that recessions do not clear out inefficient firms and reallocate resources toward more productive uses.
Our Reading
The strategy enters a familiar phase.
Goodspeed’s book challenges the conventional wisdom on recessions, arguing that they are not predictable and that the causes of past recessions have been misattributed. His analysis of historical data found no relationship between the height or length of an expansion and the depth or timing of the subsequent recession. Goodspeed also reframes recent crises, such as the 2008 recession, in ways that run counter to conventional wisdom. His policy prescriptions follow logically from his diagnosis, advocating for a “do no harm” approach during downturns. The announcement sounds familiar, as Goodspeed’s ideas are likely to be met with skepticism by those who believe in the predictability of economic cycles.
Recessions will keep happening, forever, because history will keep happening.
Author: Evan Null
