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One of the more enduring fallacies informing discussions of the economy is that there are a couple of dials located in a vault somewhere in Washington that officials can turn this way or that to control employment, output, inflation — even the price of gasoline.
Anytime something good happens, some politician inevitably steps forward to claim credit for having got the dials just right. And anytime something bad happens, you can be sure the media and political opponents will blame officials for tuning the dials to the wrong settings.
That’s what happened earlier this year when inflation began to take off and the president, Congress and Federal Reserve were criticized for overstimulating the economy in response to the pandemic. We heard it again late last month when the government reported a second quarterly decline in gross domestic product, triggering dire and exaggerated predictions of recession from…
