i don’t think it’s that tough! it’s not that we have to let bad things happen, it’s that we have to take seriously bad things that might only happen infrequently. 1/

again, stabilizing inflation and the business cycle was not the problem. it was that we let triumphalism over this superficial stability lull us into complacency about things we all knew were occurring! 2/

we knew, in the triumphalist 1990s, that inequality was accelerating, manufacturing was offshoring and trade imbalance growing, that households were increasingly reliant on wealth and asset appreciation. the policy community cheerled financial complexity. 3/

we could have addressed these issues while finding ways to keep inflation low and business cycles moderate. (to address inequality we’d have had to tolerate the “bad things” of asset wealth losses, but we could have cushioned the “main street” impacts.) 4/

the problem is that slow, quiet poisons develop interested constituencies, and absent some sense of crisis, it’s politically difficult to overcome those constituencies and enact an antidote. 5/

if we can do a better job of avoiding those poisons, or if we can improve the political system to act capably even against strong parochial resistance absent crises, we don’t need the frequent crisis! 6/

(but if we can’t do those things, we might. that indeed would be a hard pill to swallow. even there, however, like controlled forest burns, we can design for more smaller, frequent crises to be tolerable.) /fin