The Resolution Foundation's James Smith has written a nice paper on the likelihood of recession and the fact that, with monetary less able to support the economy, we need to think about alternative ways of tackling recessions. I just want to amplify what he says in two ways.

First, there's increasing evidence that recessions can do long-term damage, even if the economy appears to bounce back in the short-term. There are at least three mechanisms here:

- Education. Bryan Stuart shows that the 1980-82 recession in the US "generated sizable long-run reductions in education and income." Parents who suffer a drop in income spend less on children's books and educational trips, and this makes them less likely to go to college a few years later. Such effects are magnified if bad macro policy causes restraints upon public spending on schools and libraries.

- Productivity. Recessions increase uncertainty, which depresses investment in both capital and R&D, leading to lower productivity growth. The Bank of England's Dario Bonciani and Joonseok Jason Oh say:

Shocks increasing macroeconomic uncertainty can lead to very persistent negative effects on economic activity that last well beyond the business cycle frequency.

- Scarring. A recent paper by Erin McGuire shows that people who grow up in hard times "invest less in risky assets throughout their lives, invest more in property, and are less likely to be self-employed." This corroborates research (pdf) by Ulrike Malmendier and Stefan Nagel. Through this channel, recessions can reduce entrepreneurship and increase the cost of capital even decades later.

Against all this, it is theoretically possible that recessions have a beneficial "cleansing" (pdf) effect: in driving inefficient firms out of business, they make it easier for more efficient ones to expand, and this raises productivity growth.

One Big Fact tells us that effect hasn't operated recently: productivity has flatlined since 2008. One reason for this is that financial crises can hamper the expansion of even the best firms, in part by causing them to fear for the future availability of credit.

All this evidence makes me believe that recessions are more costly than I (and I suspect others) previously thought. Policy-makers should, therefore, do more to prevent or mitigate them.

Which brings me to my second amplification of James' paper. "We can't recession-proof the economy" he says. He's right. We cannot prevent recessions by seeing them in advance and relaxing monetary or fiscal policy, simply because recessions are unpredictable. Back in 2000 Prakash Loungani wrote that "the record of failure to predict recessions is virtually unblemished", a fact that remains true today. The Bank of England did not cut Bank rate to 0.5 per cent until March 2009, a full year after the recession began.

For me, this requires alternative policies. Some should aim at reducing the risk of recession, for example by ensuring that banks are so well capitalized that losses needn't lead to cuts in lending. Others should aim at moderating recessions via strong automatic stabilizers, such as progressive taxation and a strong welfare state - and perhaps a job guarantee.

Yes, such changes might reduce the benefits of the cleansing effects of recession. I suspect, though, that such productivity-enhancing gains could be achieved at much lesser cost by policies to increase product market competition.

Of course, recessions are an inevitable aspect of capitalism. With their costs now greater than previously thought, it is all the more important to mitigate them, which requires not just macro policy but also institutional change.