The Roots of Recession
A review of Recession: The Real Reasons Economies Shrink and What to Do About It by Tyler Goodspeed, 320 pages, Basic Venture (March 2026).
As we may be heading that way, now seems the perfect time to consider what creates a recession. In his new book, Recession, economist Tyler Goodspeed dispels many of the more mechanical notions, such as the idea that there is a causal tie between expansions and downturns, embracing instead the view that most recessions are caused by sudden shocks to the system.
He makes a strong case, citing specific historical recessions and showing why they should not be seen as the results of too much growth and greed, as many economists have asserted. Instead, Goodspeed sees recessions as driven by events that derive from natural disasters, wars, and resource scarcity, such as the one we may face as a result of the US–Israel war with Iran.
Goodspeed has little patience with the moralising that claims recessions are a nation’s just deserts for periods of greed and moral decrepitude. He disapprovingly cites Alan Greenspan’s description of periods of “irrational exuberance” for which Greenspan suggested that downturns and recessions were just punishments. Goodspeed compares much of this sort of discussion to “the parables of Jesus or Aesop’s fables”: fine for moral instruction, but not really the prime causes of economic downturns.
“Recessions,” Goodspeed writes, “occur and have always occurred in actual history. In which people endure war, weather, pandemics, strikes, and accidents of interminable variety, any of which can strike any given year.”
He also rejects the idea that recessions are “cleansing” and, somehow, good in the long run, like a kind of economic enema. Instead, he believes recessions offer “pain without gain.”
This new approach to economics relies less on arcane statistics and monetary policies than on historical realities such as climate change and plagues as the drivers of recessions. Goodspeed picks up on a thread started by such writers as William H. McNeill, whose 1976 book Plagues and Peoples, demonstrates the key role played by diseases in shaping history. For instance, McNeill traces central Africa’s slow pace of development to the impact of the tsetse fly.
This approach was renewed in Kyle Harper’s brilliant The Fate of Rome: Climate, Disease, and the End of an Empire, published in 2017. Harper traces the Roman empire’s decline to changes in the climate—mostly from warm to cool and dry—and to diseases, the impacts of which were magnified by the resulting reduction in crop yields. It was not Rome’s sinfulness that did it in, but a changing physical world and the rise of lethal microbes. Harper describes his story as an “account of how one of history’s most conspicuous civilizations found its dominion over nature less certain than it ever dreamed.”
Like McNeill and Harper, Goodspeed makes his case well, and he does it with a deft literary hand that is rare among economists. This is not to say that he avoids getting into the statistical weeds beloved by the practitioners of his field, but he drives his case primarily by discussing the specific historical circumstances that lay behind economic disasters. “Recessions,” he writes, “are, and have always been, about shocks—costly interruptions of positive economic growth.”
Much of Goodspeed’s work, like that of McNeill and Harper, is tied to natural causes. He attributes recessions in Great Britain and Western Europe in 1710, 1731, and 1740 to inclement weather and poor harvests. The same mechanism can be seen in later episodes. The 1815 eruption of Mount Tambora in Indonesia, the largest volcanic eruption in recorded history, is one such example. The “year without a summer” that followed the eruption devastated harvests around the world; temperatures dropped by as much as 3°C due to the materials ejected into the atmosphere impeding a significant proportion of sunlight from reaching the surface of the earth.
Goodspeed places particular emphasis on the US-led Panic of 1857, an event obscured by its proximity to the American Civil War. Rather than providing a moralistic reading that places the blame on greed, Goodspeed focuses on primary causes, such as a grasshopper plague that decimated land values in the West and the sinking, in a hurricane, of a ship carrying gold from California, a disaster that contributed to a reduction in liquidity.
In 1857, and in other downturns, the common assumption was that boom times had led naturally to recession. Often, Goodspeed notes, economists spoke as moral prophets, suggesting that the downturns were the natural results of “excitement” followed by “convulsion and stagnation.” Similar language was applied to busts like that which occurred in 1879, the disastrous Depression of the 1930s, and the more recent real estate-led busts, notably, the 2008 financial crisis.
Rather than describing them as being a part of a cyclical pattern, Goodspeed explains recessions as being tied more closely to phenomena such as droughts and crop failures that led to the 1930s Dust Bowl, which further devastated the US’s already depressed rural economy. In modern times, the prime causes of recessions—as we see today—revolve around energy shortfalls.
The history of energy shocks goes back well before the primacy of oil, and it predates even coal. Energy shocks are of particular interest for Goodspeed, a former acting chairman of the Council of Economic Advisors and now chief economist for Exxon Mobil, the US’s largest energy company. He also lives in Texas, where oil prices are followed as closely as the stock markets are in London and New York.
Read the rest of this piece at Quillette.
Joel Kotkin is the author of The Coming of Neo-Feudalism: A Warning to the Global Middle Class. He is the Roger Hobbs Presidential Fellow in Urban Futures at Chapman University and and directs the Center for Demographics and Policy there. He is Senior Research Fellow at the Civitas Institute at the University of Texas in Austin. Learn more at joelkotkin.com, follow him on Substack and Twitter @joelkotkin.
Homepage photo credit: Ian Simmonds, via Pexels.
