Contents
- Hysteresis Effect: Definition and Basics
- History of the Term and Its Application
- Hysteresis in Economics
- Hysteresis of Unemployment
- Hysteresis in International Trade
- Hysteresis in Marketing
Hysteresis Effect: Definition and Basics
The hysteresis effect is a phenomenon where changes in certain indicators persist even after the initial causes of their occurrence cease to act. This means that a temporary change in one factor can lead to permanent changes in another. Hysteresis emphasizes that the value of indicators does not always depend solely on current conditions; factors that acted in the past continue to influence outcomes.
The connection with the concept of irreversibility is also important: once a change occurs, even if the cause disappears, that change remains. This dependency is often illustrated by a hysteresis loop, where the independent variable is an external factor, such as the advertising budget, while the dependent variable could be, for example, market share. The graph shows that the dependent variable does not change instantly but with some delay, indicating a relationship between these indicators.
History of the Term and Its Application
The term "hysteresis" was introduced in 1881 in physics during studies of magnetism. Researcher D.A. Ewing conducted experiments on the magnetization of iron and noticed that the metal retains magnetization even after the magnetic field disappears. This discovery suggested that the hysteresis effect could occur not only in physics but also in other fields such as biology, chemistry, and economics.
In economics, the hysteresis effect has not gained wide recognition and is often not included in traditional economic models. Nevertheless, its use can significantly impact the understanding of issues such as unemployment and international trade.
Hysteresis in Economics
Hysteresis in economics describes the resilience of market indicators to external fluctuations. Significant changes occur after major economic shocks, whether negative or positive. For example, the COVID-19 pandemic forced people to change their habits, and the market for food delivery surged. Even after the lifting of restrictions, the volume of this market remained high, indicating long-term changes in consumer behavior.
Economists argue that to make accurate predictions, it is necessary to account for the hysteresis effect, considering both current factors and past events that may have influenced the market. This can enhance the accuracy of mathematical models and forecasts.
Hysteresis of Unemployment
Hysteresis of unemployment is a phenomenon where a high level of unemployment persists even after the causes of its occurrence have been eliminated. The reasons for this effect can vary and often depend on the context. Key factors include:
- Skill Deterioration: People who have lost their jobs may lose their professional skills and experience, making it harder for them to find new employment.
- Psychological Factors: Unemployed individuals may lose confidence in their abilities, which also affects their future employment prospects.
- Social Factors: In conditions of mass unemployment, a decline in living standards becomes socially acceptable.
- Changes in Industries: Some professions may become obsolete, and not all workers are able to adapt to new conditions.
Hysteresis in International Trade
Hysteresis in international trade often manifests in pricing. Price adjustments in response to changes in exchange rates occur non-linearly. With small changes, prices remain stable, but with sharp fluctuations in the exchange rate, adjustments occur. There are two thresholds: the first is a sharp increase in the rate, leading to price increases, and the second is a significant decrease in the rate, causing price reductions.
Hysteresis in Marketing
In marketing, the hysteresis effect demonstrates that temporary investments in advertising can lead to long-lasting changes in sales. For example:
- Response to Advertising Campaigns: The effect of strong advertising may continue long after its completion.
- Brand Loyalty: Consumers attached to a specific brand may continue to make purchases even when market conditions change.
- Price Changes: An increase in prices may not immediately decrease demand, and consumers might continue to purchase the product for some time.
- Competitor Exit: If a competitor leaves the market, other players may increase their market share, and the return of the competitor does not always lead to a loss of that share.
- Consumer Habits: Trends for certain products may lead to a sustained increase in sales, even after interest declines.
A classic example is the company Ehrmann, which in the 1980s was able to significantly increase its market share by offering consumers a larger pack of dessert at the same price as its competitors. Although later other manufacturers followed suit, the company's share did not decrease, illustrating the hysteresis effect.