Word of the day: Hysteresis

Too long in a slump, and the slump starts to get permanent.

The Financial Times reports this morning that the Olympics don't seem to be leading to quite the tourist boom expected:

The games have attracted as many as 100,000 foreign visitors [per day] to London – more than in previous Olympics. But, on its own, that number significantly lags behind the estimated 300,000 foreign tourists [per day] who could be expected in a typical year.

As Richard Murphy points out, this means that one of the great hopes for bringing the country out of recession appears to be fading away. Which means the word of the day is hysteresis.

In general terms, hysteresis is similar to intertia; it is the concept that some things which are hard to get going may then require little input to maintain, and even more effort to reverse.

In specific economic terms, it is the theory that persistent levels of high unemployment raise the "natural" rate of unemployment, also known as NAIRU, the non-accelerating inflation rate of unemploymet. This is the level of unemployment at which, under neo-classical economics, inflation stays low and steady. (As a side-note, yes, neo-classical economics holds that a certain amount of unemployment is good. "Full employment" is thus a bad thing, because it leads to spiralling inflation)

Although it's not specifically related to GDP, it is always a fear when dealing with persistent unemployment and long periods of stagnation and recession. The cause of the phenomenon comes when layoffs in a particular sector increase the bargaining power of the remaining workers. as there are fewer of them left, they can demand higher wages, which become "sticky" in nominal terms, if the period of unemployment lasts long enough. If, at the end of the recession, the business then wants to hire new employees, they have to pay them the new, high wage. In practice, this means that either unemployment stays high permanently, or inflation goes up until the value of the high wage is back, in real tems, to where it was.

It doesn't look like we are seeing the "increased wages" part of the problem yet (since wages are very much stagnating), but that hasn't stopped Citigroup's Ajai Chopra warning everyone:

Our analysis of such hysteresis effects shows that the large and sustained output gap, the difference between what an economy could produce and what it is producing, raises the danger that a downturn reduces the economy’s productive capacity and permanently depresses potential GDP.

A street cleaner passes the Jobcentre Plus in Bath. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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She knew every trick to get a home visit – but this time I had come prepared

 Having been conned into another couple of fruitless house calls, I now parry the proffered symptoms and generally get to the heart of the matter on the phone.

I first came across Verenice a couple of years ago when I was on duty at the out-of-hours service.

“I’m a diabetic,” she told me, “and I’m feeling really poorly.” She detailed a litany of symptoms. I said I’d be round straight away.

What sounded worrying on the phone proved very different in Verenice’s smoke-fugged sitting room. She was comfortable and chatty, she had no fever or sign of illness, and her blood sugar was well controlled. In fact, she looked remarkably well. As I tried to draw the visit to a close, she began to regale me with complaints about her own GP: how he neglected her needs, dismissed her symptoms, refused to take her calls.

It sounded unlikely, but I listened sympathetically and with an open mind. Bit by bit, other professionals were brought into the frame: persecutory social workers, vindictive housing officers, corrupt policemen, and a particularly odious psychiatrist who’d had her locked up in hospital for months and had recently discharged her to live in this new, hateful bungalow.

By the time she had told me about her sit-in at the local newspaper’s offices – to try to force reporters to cover her story – and described her attempts to get arrested so that she could go to court and tell a judge about the whole saga, it was clear Verenice wasn’t interacting with the world in quite the same way as the rest of us.

It’s a delicate path to tread, extricating oneself from such a situation. The mental health issues could safely be left to her usual daytime team to follow up, so my task was to get out of the door without further inflaming the perceptions of neglect and maltreatment. It didn’t go too well to start with. Her voice got louder and louder: was I, too, going to do nothing to help? Couldn’t I see she was really ill? I’d be sorry when she didn’t wake up the next morning.

What worked fantastically was asking her what she actually wanted me to do. Her first stab – to get her rehoused to her old area as an emergency that evening – was so beyond the plausible that even she seemed able to accept my protestations of impotence. When I asked her again, suddenly all the heat went out of her voice. She said she didn’t think she had any food; could I get her something to eat? A swift check revealed a fridge and cupboards stocked with the basics. I gave her some menu suggestions, but drew the line at preparing the meal myself. By then, she seemed meekly willing to allow me to go.

We’ve had many out-of-hours conversations since. For all her strangeness, she is wily, and knows the medical gambits to play in order to trigger a home visit. Having been conned into another couple of fruitless house calls, I now parry the proffered symptoms and generally get to the heart of the matter on the phone. It usually revolves around food. Could I bring some bread and milk? She’s got no phone credit left; could I call the Chinese and order her a home delivery?

She came up on the screen again recently. I rang, and she spoke of excruciating ear pain, discharge and fever. I sighed, accepting defeat: with that story I’d no choice but to go round. Acting on an inkling, though, I popped to the drug cupboard first.

Predictably enough, when I arrived at Verenice’s I found her smiling away and puffing on a Benson, with a normal temperature, pristine ears and perfect blood glucose.

“Well,” I said, “whatever’s causing your ear to hurt is a medical mystery. Take some paracetamol and I’m sure it’ll be fine in the morning.”

There was a flash of triumph in her eyes. “Ah, but doctor, I haven’t got any. Could you –”

Before she could finish, I produced a pack of paracetamol from my pocket and dropped it on her lap. She looked at me with surprise and admiration. She may have suckered me round again, but I’d managed to second-guess her. I was back out of the door in under five minutes. A score-draw. 

Phil Whitaker is a GP and an award-winning author. His fifth novel, “Sister Sebastian’s Library”, will be published by Salt in September

This article first appeared in the 23 June 2016 issue of the New Statesman, Divided Britain