Why Experts Keep Getting the Economy So Wrong

Derek Thompson and economist Jason Furman explore why economic experts consistently overpredict recessions despite the US economy’s surprising resilience. They analyze failed doomsday forecasts regarding inflation, tariffs, and the Iran war, attributing the disconnect to a shift toward a diversified "100-legged stool" economy and improved monetary policy. The episode also critiques media sensationalism, arguing that commentators often confuse short-term negative events with long-term positive economic trends.

Topics discussed

Introduction: The history of failed recession predictions Current economic resilience despite tariffs, AI, and war The disconnect between media doom and stable GDP Introduction of guest Jason Furman Sponsor: ADT Security Systems Sponsor: Uber Safety Features Distinguishing economic models from commentators Defense of models against sensationalist media Reviewing specific recession predictions: Inflation Why 2022 interest rate recession fears were wrong Analyzing why bipartisan recession calls failed Economy becoming less sensitive to interest rates Shift from manufacturing to services economy Supply side factors in 2021-2022 inflation Debating the ratio of demand vs supply inflation Adjudicating supply and demand via GDP growth The Great Moderation and economic stability Factors contributing to current economic moderation Detour: Defining the Great Moderation thesis Prospects for a 'Great Moderation 2.0' Improved credibility of central bank policy Emerging markets weathering global shocks The role of debt in economic safety Summary: Better policy and economic diversity Tariffs: Models were correct, media was not Quantifying the actual impact of tariffs on growth The cost of unnecessary policy errors Self-fulfilling prophecies and political pressure The risk of constant doom-mongering Criticism of non-economist commentators Injecting truth into economic discourse Sponsor: Mint Mobile Sponsor: Lincoln Rejuvenate Iran War: Overstated economic impact Fertilizer supply chains and crop yields Quantifying small impacts vs. perceived catastrophe Oil prices and the Strait of Hormuz closure Historical context of oil price shocks China's role in capping global commodity prices Anticipating global policy adjustments Understating economic flexibility and adjustment Germany's response to Russian gas cuts Technological developments reducing oil sensitivity Consumer and labor market flexibility Comparison to 19th-century monetary policy Media criticism: Events vs. Trends Economist's perspective on media incentives The bias toward negative events in news Balancing self-fulfilling prophecies and truth Supply-side nature of long-term growth Focusing on trends rather than events Journalist's reflection on negative bias The invisibility of the pandemic in macro data The miracle of steady GDP per capita growth AI as an event or a long-term trend AI's impact on productivity and employment Predicting future productivity growth rates Social and political consequences of high growth The trade-off of rapid technological change Choosing a productivity growth rate The reality of service-based labor markets The gap between tech hype and economic reality Conclusion: Appreciation and future outlook Final thoughts on economic flexibility and adjustment

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