Shocks, Crises, and False Alarms
How to Assess True Macroeconomic Risk
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- $24.99
Publisher Description
Financial Times Best Books of 2024: Economics — Martin Wolf
"...an invaluable framework to better understanding growth, the financial sector, and the key trends shaping the global economy" — Financial Times, Tej Parikh
The shocks and crises of recent years—pandemic, recession, inflation, war—have forced executives and investors to recognize that the macroeconomy is now a risk to be actively managed. Yet unreliable forecasting, pervasive doomsaying, and whipsawing data severely hamper the task of decoding the landscape. Are disruptions transient and ephemeral—or permanent and structural? False alarms are costly traps, but so are true structural changes that go undetected.
How can leaders avoid these macro traps to make better tactical and strategic decisions?
In this perspective-shifting book, BCG Chief Economist Philipp Carlsson-Szlezak and Senior Economist Paul Swartz provide a fresh and accessible way to assess macroeconomic risk. Casting doubt on conventional model-based thinking, they demonstrate a more powerful approach to building sound macroeconomic judgment. Using incisive analysis built upon frameworks, historical context, and structural narratives—what they call "economic eclecticism"—the book empowers readers with the durable skills to assess continuously evolving risks in the real economy, the financial system, and the geopolitical arena.
Moreover, the authors' more nuanced approach reveals that the all-too-common narratives of economic collapse and decline are often false alarms themselves, while the fundamental strengths of our current "era of tightness" become visible.
With rational optimism rather than gloom, Shocks, Crises, and False Alarms speaks to the key financial and macroeconomic controversies that define our times—and provides a compass for navigating the global economy. Rather than relying on blinking dashboards or flashy headlines, leaders can and should judge macroeconomic risks for themselves.
PUBLISHERS WEEKLY
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.
