Getting Hysterical about Hysteresis

Hysteresis is the dependence of a system not only on its current environment but also on its past environment. This dependence arises because the system can be in more than one internal state. To predict its future development, either its internal state or its history must be known.
^{--http://en.wikipedia.org/wiki/Hysteresis}

It has a specific meaning in the field of economics:
"Hysteresis is used extensively in the area of labor markets. According to theories based on hysteresis, economic downturns (recession) result in an individual becoming unemployed, losing his/her skills (commonly developed 'on the job'), demotivated/disillusioned, and employers may use time spent in unemployment as a screen. In times of an economic upturn or 'boom', the workers affected will not share in the prosperity, remaining long-term unemployed (over 52 weeks). Hysteresis has been put forward as a possible explanation for the poor unemployment performance of many economies in the 1990s. Labor market reform, or strong economic growth, may not therefore aid this pool of long-term unemployed, and thus specific targeted training programs are presented as a possible policy solution." Ibid.

I've never heard the term before today but noticed it mentioned in an article:

The Spanish authorities and the Commission are betting that Spain’s policy of “internal devaluation” and wage cuts within EMU will slash unit labour costs enough to claw back competitiveness, but this is a risky strategy that may overlook the lasting damage to the productive economy - a concept known as "hysteresis". --http://www.telegraph.co.uk/finance/financialcrisis/9835502/Spains-crisis-strategy-under-fire-as-economy-buckles-again.html

It is also mentioned in another article:

The term in vogue is "hysteresis". If people are out of work for long enough, the damage to skills and human capital becomes a permanent loss. The underlying growth potential of the economy is damaged for years. This is what we are seeing in half Europe right now. --http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100022429/david-camerons-referendum-may-never-be-necessary/

So, hysteresis in the labor economic sense, means decaying job skills due to prolonged unemployment.  This is the risk that someone who has been unemployed a long time may never be employed again.

It is used as an excuse not to cut the budget, because of the potential damage to the long-term economy:

Hysteresis can mean that the costs of failing to pursue expansionary policies are much greater than even the direct effects on employment. And it can also mean, especially in the face of very low interest rates, that austerity policies are actually self-destructive even in purely fiscal terms: by reducing the economy’s future potential, they reduce future revenues, and can make the debt position worse in the long run. --http://krugman.blogs.nytimes.com/2011/09/18/hysteresis-begins/

I think it is all tosh.  I think "hysteresis" is a pseudo-scientific word meaning that you mustn't cut government spending ever.  It sounds like an economic disease.  "Dr. Krugman says that if you cut the budget, the economy may develop hysteresis."  It has about the same credibility as "female hysteria", which was a diagnosis given by quack doctors, for which they also conveniently had an interesting treatment.

I will comment further if I run across the word again.