Four Ways to Think About the Economy

I see four different schools of thought about how the economies of the U.S. and much of the developed world should be managed. The challenge for the Federal Reserve and other central bankers is that it's hard to know who's right.

Let's call the first group of economists the neutralists. They would say that as long as inflation is low and stable, central banks can have only a modest and short-lived effect on variables such as jobs and economic growth. They think that the media pay too much attention to monetary policy, leading government officials to ignore more important questions, such as how to make the economy more productive.