Economists Have Been Slow to Apply History, With One Big Exception - Graham Allison

May 28 2022, Opinion: "Is the U.S. economy headed for a hard landing? Federal Reserve Chair Jerome Powell says no. At the Federal Open Market Committee’s May 4 press conference, he insisted that the Fed will manage a "softish" landing. To the contrary, former Treasury Secretary Larry Summers says unambiguously yes—with an exclamation point. And he explains the reasons for his confidence in his prediction: “If you look at history, there has never been a moment where inflation is above 4% and unemployment is below 5% where we did not have a recession within the next two years.” While Summers’s bet is important in itself for investors and policy makers, the process of reasoning that leads him to this conclusion is also instructive." Read Via Barron's

HKS Faculty Author - Graham Allison