EDITORIAL

Supposing we asked a handful of scientists to explain the meaning of energy, and the first went into great detail about heat and entropy and the end of the universe in the year 20 000 000 000 000 AD, whilst the second shed light on m x g x h and v², and the third was slightly misleading, speaking of mass times velocity or force times time ...
Hard to imagine? Well, how about asking a handful of macro-economists to explain the meaning of recession? You will suddenly find yourself bombarded with a wide selection of definitions. The strictest definition would say an economy is in recession as soon as economic growth declines. This would suggest that China will be hard hit by recession in 2009, given that it is expected to achieve growth of just 8 percent, down from over 12 percent in 2008. And you think that is confusing? Well, I can assure you, it gets better. For if we take a closer look at the sinus-like model of economic performance cycles, according to this definition the ugly word “recession” arches over the first vertex, because growth falls in this area as can be seen by the corresponding cosine-like curve (the cosine is the 1st derivative of the sinus), which, in turn, sharply increases in a depression, something which confuses both philosophers and psychologists alike (after negative growth comes positive contraction?). This is probably why some economists believe that a downturn goes hand in hand with recession – they just need to agree on which factor kicks in first.
Today, they prefer to see a recession as a decline in economic performance – or in other words, they prefer not to see it at all. However, they are all agreed on at least one aspect: and that is that something is contracting (an analogue explanation in energy terms: “Something is there.”). And because a single raindrop does not herald the beginning of winter, that “something” has to be in decline for at least two consecutive quarters – which brings us closer to the change of the change and thus the 2nd derivative (minus sinus, 10th grade, remember?). Why two quarters? Because firstly even graduates from Princeton, Yale and Stanford find it easier to count to two than to form 2nd derivatives and, secondly, a recession rarely lasts much longer anyway, because the economy usually recovers within this period.
Enough of economics and other topics that potentially lead to heated debate! However, before I go, if one of the scientists we asked at the beginning, let’s say he was a meteorologist, mumbled something along the lines of “Energy is path times force divided by time”: would you let him predict the weather forecast for the rest of the year?
Hans-Georg Schätzl
Editor-in-chief
PS: Less than 15 months ago the majority of bankers and “analysts” (“with a big stretch of the imagination” may I add) pegged the German Dax at almost 10,000 points by the end of 2008. In hindsight they were about 100 percent off target.

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