Economic historian argues that growth doesn’t naturally collapse—and that external shocks, not overheated economies, are the real drivers of recessions.
For decades, economists, investors, and policymakers have accepted a familiar narrative: prolonged periods of strong economic growth eventually become unsustainable, leading almost inevitably to recession. According to this conventional wisdom, economic booms accumulate excesses—whether excessive borrowing, asset bubbles, inflation, or speculation—that ultimately require painful corrections.
However, a new historical analysis is challenging this deeply embedded belief.
Drawing on more than three centuries of economic history in the United States and the United Kingdom, economic historian Tyler Goodspeed argues that recessions are not the natural consequence of healthy economic expansions. Instead, his research suggests that downturns are largely triggered by unexpected external shocks rather than the internal weaknesses of growing economies.
The findings, presented in his book Recession: The Real Reason Economies Shrink and What to Do About It, challenge one of macroeconomics’ most enduring assumptions and invite policymakers to rethink how they evaluate economic growth.
A Different Perspective on Economic Downturns
Goodspeed’s research examines 132 recessions dating back to the year 1700 across the U.S. and U.K. Rather than accepting the traditional boom-and-bust theory, he tested whether the historical evidence actually supports it.
According to the conventional model, longer and stronger expansions should gradually become more vulnerable as economic imbalances accumulate. If this theory were correct, older expansions would be more likely to end, stronger periods of growth would be followed by deeper recessions, and downturns would occur with relatively predictable frequency.
Instead, the historical data rejected every one of these expectations.
The research found that long-lasting expansions do not become increasingly fragile simply because they have existed for an extended period. Strong economic growth does not consistently lead to more severe contractions, nor are recessions occurring at a constant rate across history.
Perhaps most significantly, recessions have actually become less frequent over time rather than remaining cyclical events.
Growth Matters More Than the Downturns
Another conclusion emerging from the historical analysis is that periods of expansion contribute far more to long-term prosperity than recessions diminish it.
While recessions understandably attract enormous public attention due to rising unemployment and declining economic activity, they are generally much shorter than periods of sustained growth. Most recessions historically have lasted around one year, with the overwhelming majority ending within two years.
Once recoveries occur, economies often return remarkably close to the long-term trajectory they would likely have followed had the recession never occurred.
This suggests that maintaining healthy economic expansion may deserve at least as much policy attention as attempting to predict or prevent recessions altogether.
The Real Causes: Unexpected Shocks
Rather than blaming recessions on economic excess, Goodspeed categorizes their causes into three broad groups of external shocks.
The first category consists of “Acts of God,” including pandemics, natural disasters, and severe weather events that disrupt commerce or agricultural production.
The second category involves “Acts of Man,” referring to human-driven disruptions such as major financial fraud, banking failures, or other systemic crises.
The third category, termed “Acts of Church,” includes government actions or policy decisions capable of abruptly slowing economic activity, such as consumer credit controls or other restrictive interventions.
These shocks, rather than the age or strength of an economic expansion, appear to be the primary catalysts behind historical recessions.
War: The Greatest Threat to Economic Expansion
Among all external shocks examined, one stands apart as the most destructive.
According to the historical record, major wars have repeatedly proven to be the most consistent and damaging trigger of prolonged recessions.
Goodspeed points to several historical examples. The United Kingdom experienced lengthy recessions during and immediately after both World Wars, as well as during the Seven Years’ War in the eighteenth century. In the United States, the American Revolution was accompanied by an economic contraction comparable in magnitude to the Great Depression.
Even earlier, between 1717 and 1720, widespread piracy across the Atlantic significantly disrupted trade after thousands of unemployed private sailors turned to piracy following the end of a major European conflict. Commercial activity slowed dramatically until maritime security was restored.
These historical episodes demonstrate how conflict and geopolitical instability can interrupt trade, reduce investment, and halt economic expansion irrespective of the economy’s prior health.
Why Recessions Are Becoming Less Common
One of the more optimistic conclusions from the research is that recessions have gradually become less frequent over the past three centuries.
Rather than indicating growing instability, modern economies appear increasingly capable of absorbing shocks that once would have caused severe contractions.
Several structural improvements contribute to this resilience.
Banking systems today are generally more diversified and better regulated than those of the nineteenth century, reducing the likelihood that localized financial problems escalate into nationwide crises.
Similarly, energy systems have become increasingly diversified across both fuel sources and supply chains, making economies less vulnerable to disruptions that previously would have produced widespread economic damage.
These developments suggest that households, businesses, and institutions have steadily improved their ability to withstand unexpected events over time.
Can Recessions Be Predicted?
Perhaps one of the book’s most provocative conclusions is that recessions remain fundamentally unpredictable.
Economists have long searched for reliable warning signs, examining everything from asset valuations and interest-rate movements to consumer spending and manufacturing activity.
Yet the historical evidence reviewed in the research suggests there is no consistent indicator capable of forecasting recessions before they occur.
Instead, Goodspeed argues that recessions resemble random shocks rather than inevitable stages of an economic cycle.
The most reliable real-time indicator is not a forecasting tool but a confirmation that a recession is already underway: a sudden and significant increase in unemployment.
Interestingly, this rise in unemployment typically results less from companies rapidly laying off workers than from businesses abruptly slowing or freezing new hiring.
Lessons for Policymakers
The research also raises important questions for economic policy.
If expansions generally end because of unforeseen external shocks rather than internal economic overheating, policymakers may need to reconsider interventions designed primarily to slow growth before presumed imbalances develop.
According to the historical findings, healthy expansions should not automatically be viewed with suspicion simply because they have lasted for many years.
Instead, governments may achieve better long-term outcomes by strengthening resilience against external disruptions, improving financial stability, diversifying energy supplies, and preparing for unforeseen crises rather than attempting to engineer economic slowdowns based on assumptions of inevitable cyclical decline.
Looking Ahead
Although recessions will almost certainly continue to occur, history suggests they are neither predetermined nor unavoidable consequences of successful economic growth.
Major shocks—including pandemics, wars, financial crises, and significant policy disruptions—remain the most common triggers. Yet increasingly resilient financial systems, diversified infrastructure, and institutional learning have reduced both the frequency and severity of many downturns.
For businesses, investors, and governments, the broader message is one of cautious optimism. Instead of assuming every prolonged expansion is destined to fail, attention may be better directed toward fostering sustainable growth while strengthening society’s capacity to absorb unexpected shocks.
Ultimately, the research suggests that prosperity is shaped far more by the many years economies spend expanding than by the relatively brief periods in which they contract—a perspective that challenges centuries of economic thinking and reframes how recessions should be understood in the modern world.
