I have a theory of recessions that is at substantial odds with the ‘business cycle’ notion of recessions. The name suggests too much the idea of a pendulum with a simple behavior. This is more like an anti-theory in that it claims to explain why recession are so hard to navigate. I claim that recessions are generally about finding new equilibria. As such they are at best finding solutions to non-linear equations where no one knows the parameters. They are a Darwinian process which is not modification of DNA but more in the sense of memes.
I think that Sowell’s “Conflict of Visions” plays a role here. Politicians and economists have divergent visions of where an equilibrium might lie and push in that direction. Politicians will also espouse visions that will get them elected and so to a degree popular visions drive towards such agglomerations of visions thru government policy. Visions as memes are contagious but visions seldom match equilibria. It is more than a matter of memes, however, whether numbers such as wages, health care expenditures, home building rates are indeed at equilibrium. Politics may be the art of the possible, but the possible is not always visible from any distance away. Wishful thinking can push us away from equilibrium and this prolongs the search. Economists generally bring more honesty but they usually can’t see all the way to an equilibrium either. We must grope and that is what recessions are for.
Preferences are seen by many to be among the dynamic variables as when we are exhorted to want less energy or more factory goods (so as to put the factory workers back to work.)
This model allows for two force functions: some dynamic systems are chaotic and other systems are merely evolving. Some see in evolving systems periods analogous to recessions. A new predator has sprung up, or the prey has died off. Symbiosis generally begins as a battle, evolving from a negative sum predatory game to a symbiotic positive sum game.