"Atlantic piracy had reached its peak, blockading the port of Charleston and choking off trade routes from the Caribbean to Long Island. Trade collapsed. The money supply collapsed. The economy followed. It's the kind of cause-and-effect that doesn't fit neatly into any business-cycle theory."
"Goodspeed, the chief economist of ExxonMobil and a former acting chair of the Council of Economic Advisers, spent years combing through four centuries of economic data-from 17th-century colonial trade collapses to the 2008 financial crisis-and arrived at a conclusion that is either deeply clarifying or deeply unsettling, depending on your disposition. Recessions, he argues in his new book Recession: The Real Reasons Economies Shrink and What to Do About It, are not cycles. They are random."
""The reality is that recessions will continue to happen because history will continue to happen," Goodspeed said in a recent interview with McKinsey's Author Talks. "The idiosyncratic nature of recessions rebels against evolved human logic," he told me over email. "We are pattern-seeking mammals; patterns are how we relate observed stimuli to subsequent negative experiences.""
""Humans naturally try to link trauma to some precipitating action in hopes of correcting it next time, he said. History just doesn't work that way. "I'm sure there will be participants in the market for economic prognostications who will continue to insist that they possess a crystal ball.""
Atlantic piracy peaked in the early 18th century, blockading Charleston and disrupting trade routes from the Caribbean to Long Island. Trade collapsed, the money supply collapsed, and the economy contracted despite no war or financial panic. Recessions are presented as not fitting standard business-cycle explanations because their causes can be idiosyncratic and historically contingent. A long review of economic data from colonial trade collapses to the 2008 financial crisis supports the view that recessions are random. The persistence of recessions is linked to the continued occurrence of historical events. Human pattern-seeking leads people to search for repeatable triggers, but history does not reliably follow that logic.
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