Shocks, Crises, and False Alarms: How to Assess True Macroeconomic Risk

Shifts in labor markets, capital flows, and inflation can’t always be foreseen, but they can be navigated, according to this thought-provoking debut guide. Carlsson-Szlezak and Swartz, both economists at the Boston Consulting Group, warn against putting too much faith in long-term economic models, suggesting that they provide a false sense of certainty. Instead, the authors favor an unsystematic approach called “economic eclecticism,” which encourages consulting empirical data, historical examples, and pithy rules of thumb (tight labor markets are the spark for productivity growth, for instance) to craft “narratives” about where markets are headed. Applying that framework to today’s economy, the authors anticipate that the next 10 years will bring tight labor markets, heavy investment in green technology, and the onshoring of supply chains, which they argue will lead to higher inflation that will be mitigated by productivity gains stemming from AI. Carlsson-Szlezak and Swartz demonstrate a welcome recognition of the shortcomings of traditional economic models, though the implication that their services and those of other consultants will always be necessary for reading economic tea leaves feels self-serving. Still, this is a stimulating primer on how business leaders can keep abreast of changing economic tides. (July)