How a Paper Jam is Like a Recession

Our story starts with a paper jam.

During the mid-1990s the Chicago’s children’s court had a printer problem. Just because of paper jams, its attorneys were missing deadlines. And without those mandated court documents, two out of three defendants had to be released.

The Xerox technician who solved the problem said the court had been using “..some off-brand, really down-in-the-dumps paper.” By elevating their paper quality they actually could reduce the crime rate.

Paper Jams

Memorialized in the 1990s film Office Space, the paper jam has been around for a long time.

This is one version:

The Xerox Paper Jam Team

At Xerox, the paper jam team includes a mechanical engineer and a programmer. It needs people who know physics and chemistry and the trees that our copier paper could have come from. (In Spain the paper comes from the eucalyptus while in the U.S. our paper making trees include the Douglas fir and the Kentucky Southern pine.)

Meanwhile, at the office or the factory, copier equipment could have vacuum feeders that suck the paper in. Then, the paper could receive an electric charge or be soaked in ink. It could be single-sided or duplex. The jam teams also know that there are more winter jams than summer jams.

You can see where we are going. The paper flow has countless potential glitches. It makes us realize that the copier machine was a marvelous innovation that requires the interface of the mechanical and the biological–of the machine and the paper. And for this reason, we will always have jams.

Our Bottom Line: The Circular Flow

With all flows, jams are a problem. We have traffic jams, logjams, and ice jams. Each stops the normal flow from circulating.

Similarly, the circular flow of the market economy can have jams. When the circular flow moves smoothly, the market flourishes. But less hiring or tariffs or countless other developments could slow the flow.

In this circular flow model, you can see the dollar flows in the outer loop and goods, services, and factor resources moving in the opposite direction:

Somewhat like a paper jam, the circular flow was upset in 2009. With the possibility that the money flows would freeze because of a banking crisis, we had an economic “jam.”

We just don’t call it a jam. When the economy contracts for two quarters, has rising unemployment, and other ill symptoms, the NBER says we have a recession.

My sources and more: For today, just one source,The New Yorker, had it all. But if you want more on the circular flow, do take a look at my textbook, available at econlife.