What is 'Hysteresis'
Hysteresis comes from the Greek term meaning "a coming short, a deficiency." Hysteresis, a term coined by Sir James Alfred Ewing, a Scottish physicist and engineer (1855-1935), refers to systems, organisms and fields that have memory. In other words, the consequences of an input are experienced with a certain lag time, or delay. One example is seen with iron: iron maintains some magnetization after it has been exposed to and removed from a magnetic field.
BREAKING DOWN 'Hysteresis'
In economics, hysteresis arises when a single disturbance affects the course of the economy. An example of hysteresis in economics is the delayed effects of unemployment. As unemployment increases, more people adjust to a lower standard of living. As they become accustomed to the lower standard of living, people may not be as determined to achieve the previously desired higher living standard. In addition, as more people become unemployed, it becomes more socially acceptable to be or remain unemployed. After the labor market returns to normal, some unemployed people may be disinterested in returning to the work force.