Chain Reactions in Economics
In 1963 Friedman and Schwartz proposed a positive feedback loop as a mechanism for catastrophic failures in economics: “It happens that a liquidity crisis in a unit fractional reserve banking system is precisely the kind of event that trigger- and often has triggered- a chain reaction. And economic collapse often has the character of a cumulative process. Let it go beyond a certain point, and it will tend for a time to gain strength from its own development as its effects spread and return to intensify the process of collapse”.
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Famous quotes containing the words chain, reactions and/or economics:
“It could not have come down to us so far,
Through the interstices of things ajar
On the long bead chain of repeated birth,
To be a bird while we are men on earth,”
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