(no subject)

[timelets]

On the other hand, if business cycles are caused by unanticipated shifts in the entire pattern of tastes and technologies across sectors, we might call that uncertainty noise. I believe that these shifts are significant for the economy as a whole because they do not cancel in any meaningful sense. The number of sectors in which there is a match between tastes and technology varies a lot over time.

When it is high, we have an expansion. When it is low, we have a recession.

...the diversity in a more complex economy means that a single crop failure or demand shock cannot have such a devastating effect; but on the other hand, the specialization in a more complex economy means that when there is a mismatch between tastes and technology, it is costly to move skills and machines between sectors to correct the mismatch.
...
Unanticipated shifts in tastes and technology within and across sectors is what we call information in discussing financial markets.

Noise. Fisher Black, 1986.

https://onlinelibrary.wiley.com/doi/full/10.1111/j.1540-6261.1986.tb04513.x
https://doi.org/10.1111/j.1540-6261.1986.tb04513.x