i guess i’d point to Minsky a bit on that. or Ashwin/macroresilience. tempering high-frequency business cycles may be bad for overall systemic stability. the “great moderation” stabilized an era of burgeoning inequality, indebtedness, and financial fragility until a large crisis resulted. 1/

more frequent course corrections might be better than stabilization that leaves underlying vulnerabilities unaddressed. Ashwin likes to use the forest fire analogy, better to do frequent controlled burns to address fuel accumulation than to suppress indefinitely until any fire will be massive. 2/

the lesson isn’t Mellonist recessions-are-good. it’s that when you have stability, you have to pay great attention to the dynamics underlying what you are stabilizing. 3/

the problem of the Great Moderation was not the moderation of the business cycles, but the insouciance it enabled re household debt growth (“democratization of credit”), fragile securitiz8ns, domino credit risk in financial derivatives, especially wealth+income rather than consumption inequality. 4/

this is exacerbated by an empirical, “social scientistic” ethos within the policy community. partial stabilization condenses problems into low frequency events. there is no evidence to point to in the high-frequency data, in the good sample sizes, between those events. 5/

this is not to say that all versions of economic liberalism (“neoliberalism?”) are doomed to collapse, nor is it to say that people like Friedman were anything worse than mistaken in their optimism. We can all be mistaken. 6/

but the late 20th C version of economic liberalism really has failed, and part of its failure derives from the partial stabilization we built into it and the hubris that resulted. whatever kind of mixed economy we hopefully will try next needs to attend to what the last iteration did not. /fin