Definition of Recession

When it comes to racism or sexual harassment, regardless of how many letters or degrees you have following your name, if you choose to define the concept too narrowly you are simply wrong. This is the situation economists find themselves in regarding the word “recession.” Collectively they have chosen a definition which is far too narrow.

A “recession” is an economic downturn. Typically the stock market declines somewhat. Sales revenue and profits by businesses declines, so large numbers of workers are laid off. Some of the people who are newly out of work can no longer make the mortgage payments on their house, so foreclosures increase. This drives down the price of real estate. Marriages fall apart. Many of the unemployed people cannot afford to pay for private health insurance, so they lose access to the health care system. People feel worried and pessimistic.

The opposite of a recession is a “boom.” Stock prices are rising and so are home values. Unemployment is low, and people feel prosperous and optimistic.

An “economic depression” is a really extremely horrible recession.

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