I want to add a few more points here around this question: why the heck am I talking about this? There are two pieces of modern economic history that have been largely misread, which contributed significantly to the slow recovery from the Great Recession. Let me explain... https://twitter.com/ModeledBehavior/status/1292916933122297857

The first misread is that the late 1990s economy was unsustainable. This was not the case. In fact, prior to the fed raising rates, energy prices & housing prices were shooting up massively, creating a misleading inflation environment.

We weren't beyond full-employment, we were simply at full-employment. That is mistake number one. Mistake number two is misreading the 2001 recession and it's aftermath.

If you look at the NBER recession dates, it's clear this was perceived to be a short recession. But the labor market was deteriorating for 2.5 years past the "end of the recession" and the Fed cut rates in this long time during which a recovery was not forthcoming.

Then, when the recovery finally did start we once again had a house prices spike significantly and then an energy price spike. Misleading inflation signals convinced people that we were at full employment around 2005, which was really a labor market still far from the late 1990s

The misleading inflationary environment combined with an unemployment rate that was no longer accurately tracking labor market slack because people who were still willing and able to work stopped looking, dropped out of the labor force

So those are the two mistakes: seeing the late 1990s as an unsustainable "beyond full employment", and 2005-2007 as "at full-employment". Why does this matter? Because those two misreads set the Fed and many others' benchmark's post Great Recession

At best, it was believed, the economy could return to pre Great Recession levels. Of course thanks to a misleading inflationary environment as well as a bias towards structural theories, this was seen as a questionable benchmark. 2007 was unsustainable even many argued.

Had the economic history been right, and the late 1990s been seen from the start as the right target to aim for, Yellen would never have raised rates in 2015 and began signaling long before that it was coming.

We also would not have had the Powell fed get so far ahead of it's skis in 2018 that the stock market panicked about it. The recovery from the Great Recession would have been years sooner. It wouldn't have been fast, but it would have been faster.

And yet we don't argue about this much despite its importance. This bad economic history had a massive influential negative effects on the mistake, both policy-wise and from the profession, that was misreading the recovery from the Great Recession.

And I promise you, this error is not over. We cannot let the lesson of the post Great Recession misread of the economy be nihilism and "trial and error" are the only way to set monetary policy. We need to correct this economic history, or we will repeat these mistakes again.

In short, the right lesson is not "oh well I guess it's unknowable". The right lesson is to rethink the past quarter century of macroeconomic history and get the damn story right.

Last point for the record. I don't consider myself a heterodox economist. I don't think this requires actual major changes in mainstream thinking per se, just getting some facts right.