Conclusion

The topic of the dynamics of recessions, discussed here, relates to a funda­mental methodological question of how economies equilibrate. While under normal circumstances it seems reasonable to simply assume equi­librium, as economists routinely tend to do, this is not a plausible assumption for a situation, such as a recession, in which it is hard to ignore pervasive disequilibria.

scarcity of resources—not because such scarcity is present only in reces­sions, but because it is more binding during recessions than under normal circumstances.

Even though my discussion focuses on recessions, its conclusions are applicable, although empirically less visible, outside of recessions, and it addresses the methodological question of the mechanism of equi­libration from the perspective of Kirznerian entrepreneurial alertness. Entrepreneurial alertness has its limits, and this is more evident when the demands on alertness suddenly increase. Entrepreneurs under such circumstances cannot be figuratively at two places at once, and they tend to focus on the activities they expect to be more profitable.

Acknowledgements I would like to thank Harry David, John Golden, Arielle John, Diana Thomas, and participants in the Applied Research in Political Economy Colloquium that took place in June 2018 in Fairfax, VA, for valu­able comments and suggestions on earlier drafts of the present paper. I gratefully acknowledge the financial help that I received from Mercatus Center while working on this paper. I am responsible for all errors.