Re: Recessions and Depressions are only a 20th century onwards

From: John Conover <>
Subject: Re: Recessions and Depressions are only a 20th century onwards
Date: 27 Apr 2001 07:46:39 GMT

The recession created by the South Sea fiasco was a biggie. Sir Isaac
Newton lost a fortune in it.

The collapse of the tulip market in the 17'th century almost destroyed
the Dutch economy, too-one of the largest financial institutions in
the world at the time-impacting the Dutch as an expansionist colonial
world power.

The world depression of the 4'th century, (which lasted almost the
entire century,) contributed significantly to the demise of the Roman
Empire, too.

Modern recessions seem to follow a Black/Scholes/Merton scenario:

meaning that the likelihood of a recession lasting at least N many
years is about proportional to 1 / sqrt (N), and its magnitude will be
proportional to sqrt (N).

Although we do not have adequate data for more than a couple of
centuries, the duration of the economic depressions in the distant
past seem to follow a similar probabilistic distribution scenario-the
chances of a depression lasting at least a hundred years is about one
in ten, or we should one about once a millennia, and so on through the
depressions of recorded history. The durations, (from the historical
perspective,) fit the distribution fairly well-the magnitudes are
difficult, to quantify.


BTW, to put it in perspective, the Great Depression of the 1920's and
30's has about a chance of happening every several-to-many centuries,
and lasted about a decade, to a quarter of a century, (depending on
whether the GDP or DJIA data is used for the analysis.) The Roman
issue of the 4'th century was far worse, and derailed the world
economy. The bad news is that we are over due for such a scenario.
The good news is that there the chances of it happening in the
immediate future is the same as it has always been, (that's kind of
what B/S/M means-depending on who is telling the story, of course.)

> >From: Edward Flaherty
> >Not true.  Documented recessions existed long before the 20th century
> >in the U.S.  1819, 1833, 1837, 1857, 1873, and 1893 were years of severe
> >recessions with a few smaller ones thrown in for good measure.  In
> >addition, the 18th century saw numerous periods with depressed
> >business conditions (some which Ben Franklin described), but data
> >is too sparse from that era to be sure exactly when or how severe
> >they were.
> >
> I think, however, that the modern industrial cycle began around 1854 in the US.
> Prior cycles would have been more along the lines of the agricultural cycle,
> except maybe the 1837 depression that some consider as America's worst.


John Conover,,

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