A new paradigm for modelling hysteresis in macroeconomic flows

Macroeconomic processes are often conceptualised as flows, and analogies are drawn with physical flow processes. Most economic processes, however, carry inherent irreversibility, a fact which these analogies neglect. A better metaphor for economic flows is suggested, involving flows through porous media. This new conceptual framework incorporates important features such as irreversibility and heterostasis through the use of hysteresis. A simple example model is derived, which may be used to derive qualitative results. (c) 2007 Elsevier B.V. All rights reserved.