Smart people did not repeal the business cycle

In The Atlantic, my friend and former boss Virginia Postrel explains why super-intelligent policy-makers falsely believed that had tamed the ups and downs of the economy. And why their miscalculations may keep us in a funk for longer than is necessary.

Congratulating policy makers for “the virtual disappearance of the business cycle” oversteps the evidence and encourages the hubris that fostered the current crisis and could make recovery more difficult. The conventional explanation for the Great Moderation gives too much credit to easily identifiable economic policy makers—“I feel the contribution of good policy cannot be overstated,” said [Christina] Romer — and too little to all those anonymous managers and workers whose everyday actions get summarized in the aggregate statistics that Fed economists watch so closely.

Read the whole thing.