Reply To: Great Moderation


It depends on how you define “doing a good job.” If you accept the simplistic premise of modern economic discussion that an economy can be evaluated by “GDP good, inflation bad”, then yes, perhaps we should indeed be singing the praises of Greenspan et al.

But of course, economic reality does not unfold along only those two dimensions – there are many other factors we need to consider as well. For example, in The Signal and The Noise, Nate Silver notes that much of the GDP growth associated with the Great Moderation was “fueled by large increases in government and consumer debt, along with various asset-price bubbles.” Of course, he draws completely the wrong conclusion from that observation, but at least he acknowledged it.