Named by James Alfred Ewing for magnetic materials (1881) and carried into economics by Edmund Phelps (Inflation Policy and Unemployment Theory, 1972) and by Olivier Blanchard and Lawrence Summers (Hysteresis and the European Unemployment Problem, 1986).
Recognizes when a system's state depends on the history that produced it, so reversing the cause will not reverse the effect.
When to reach for it
When a market, workforce, or culture has been knocked into a new state by a shock and the plan assumes undoing the shock will restore the old one.
How it runs
- Ask whether reversing the recent change would reverse the outcome.
- If not, treat the system as path dependent.
- Identify the event that moved it.
- Expect undoing that event to leave the outcome in place.
- Design interventions that act on the path the system took.
Where it sits in SOLVE eX
Go to the source
- Hysteresis in magnetic materials, the term's first use, Proceedings of the Royal Society, 1881
- Inflation Policy and Unemployment Theory, 1972
- Hysteresis and the European Unemployment Problem, NBER Macroeconomics Annual, 1986