This article is an edited draft of the introductory section of my book. I filled it in last, on the theory that I should only state what is in the text after the rest of it is finished. I am giving the manuscript a short look-over before passing along to editing. Realistically, the earliest publication date will be in early January. The text is longer than my previous works, at around 60,000 words. Has quite a few figures depicting historical data and simulation results (haven't counted, but I think more than previous books). Going forward, my articles will return to being more eclectic, as I will resuming looking at a variety of topics....
Bond Economics
Introduction to Recessions: Volume IBrian Romanchuk
...I will outline the issues as I see it. One typical insight offered from neoclassical modelling is that a recession would be the result of some sort of shock. Although my argument is that recessions are hard to forecast, that seems to offer almost no information. We can usually see certain mechanisms behind a recession, as is discussed in my manuscript (which is volume one). So it's a hard sell to say that recessions are purely random processes.
We can get slightly more specific, such as having some sort of shock to the credit markets, which might be used to help explain the events of the Financial Crisis. But once again, the Financial Crisis, was hardly "random," market participants (including bankers within "market participants") followed behavioural patterns that Minsky described long ago. Saying that there is a "random shock" to credit markets offers a whole lot less information than Minsky's writings.
So I am left with the conundrum: what is worthwhile from neoclassical theory that is worthwhile putting into a second volume of a book on recessions?
Bond Economics
What Can Neoclassical Theory Tell Us About Recessions (Serious Question)?Brian Romanchuk
One often encounters assertions that recessions are the result of an excess demand for money (or some variant), based on various equilibrium arguments. Although one could superficially interpret recessions in such a fashion, the issue is that this interpretation does not help analyse the business cycle. In other words, it is a non-falsifiable statement that offers no useful information. In my view, discussions involving "money" or "safe assets" provide us an example regarding the limited usefulness of mainstream economic theory for business cycle analysis.
Bond Economics
Money Demand Has Very Little To Do With RecessionsBrian Romanchuk
