If you were trying to engineer a representative of the mainstream economics establishment, you might come up with Austan Goolsbee. He became an economics professor at the University of Chicago at age 26 and went on to chair Barack Obama’s Council of Economic Advisers. He is now the president of the Chicago Federal Reserve. So when Goolsbee says that the conventional wisdom on economic policy is dangerously wrong, it’s worth paying attention.

Last month, Goolsbee gave a speech criticizing what he calls the “traditionalist view” of monetary policy: the belief that the only way to tame inflation is by causing a recession. This view so thoroughly dominates the economics profession that it is often considered something closer to a law of nature. It is why, when inflation began taking off last year, nearly every economist, forecaster, and CEO believed a recession was around the corner. Then the seemingly impossible happened. The inflation rate, which peaked in June 2022, fell to within a point or two of the Fed’s 2 percent goal, and the much-anticipated recession never arrived. The traditionalist view had been wrong. More than that, it may now be a liability. “In today’s environment,” Goolsbee said in the speech, “believing too strongly in the inevitability of a large trade-off between inflation and unemployment comes with the serious risk of a near-term policy error.”

Don’t let the dry econ-speak fool you. For someone in Goolsbee’s position, a sentence like that is the equivalent of standing on the steps of the Federal Reserve with a bullhorn screaming, “Stop before you crash the economy!”

“If you believe that the only way to bring inflation down is to adopt a tighter policy,” Goolsbee told me recently, “then by the time you realized that wasn’t the case, you’d have created a recession that was not necessary.”

Causing a recession in order to tame inflation is painful enough. Causing a recession when inflation is already getting under control would be tragic. The past year has been something of an economic miracle. Against all odds, we didn’t actually need a recession to bring down inflation. But if the Fed is unwilling to accept the good news, then we just may get one anyway.

The traditionalist view emerged from the stagflation crisis of the 1970s. With inflation spiraling out of control, Fed Chair Paul Volcker famously jacked up interest rates to record levels and plunged the U.S. economy into a major recession. Unemployment reached nearly 11 percent in 1982 and stayed high for years. But it worked. Inflation stabilized, and Volcker went down in history as the hero who saved the economy. The economics establishment drew a clear lesson: The cure for inflation is a recession.

This remained the dominant view of monetary policy for the next 40 years, familiar to anyone who has sat through an introductory economics course. So as inflation spiked in 2022, the overwhelming view was that a recession would be the necessary treatment. The Federal Reserve projected hundreds of thousands of job losses by the end of 2023. Former Treasury Secretary Larry Summers predicted that the U.S. would need five years of unemployment above 5 percent to bring inflation under control. A Bloomberg Economics model forecasted a 100 percent chance of a recession by October 2023.

[Read: The simple mistake t]hat almost triggered a recession

But then inflation started falling, and falling, and falling. Prices are still not quite where the Fed wants them, but they’re close. Meanwhile, by many measures, the economy is in terrific shape. Unemployment is below 4 percent. Wages are rising faster than prices. Growth has been faster than in most of America’s peer countries. Some economists half-jokingly refer to the situation as “the immaculate disinflation.”

There are two main theories for why the traditionalist view appears to have gotten things so thoroughly wrong. The first could be summarized as “COVID was different.” When the country first reopened after the pandemic, pent-up savings collided with limited supply to push prices temporarily higher. As the economy has returned closer to normal, those prices have come down. At the same time, labor-force participation has reached its highest point in more than two decades, perhaps thanks to the rise of remote and hybrid work. That has allowed the economy to add jobs without increasing labor costs so much that employers would be forced to raise prices.

The second theory has to do with the role of expectations. The scariest thing about inflation is the way it can become self-reinforcing: When future inflation becomes expected, business owners preemptively raise prices and workers demand higher wages. This dynamic led to the infamous “wage-price spiral” of the 1970s. But inflation expectations have remained stable this time around. In other words, one reason the Fed didn’t have to engineer a recession is precisely that Americans already trust it to bring inflation under control.

Whatever the exact explanation, some economists are convinced that the old consensus—you can’t stop inflation without a recession—has turned out to be wrong. The question now is whether the Fed will learn that happy lesson. (As one of 12 members of the Federal Open Market Committee, which convenes regularly to vote on interest rates, Goolsbee has a direct role to play in providing an answer.) At its most recent meeting in September, the Fed signaled that it will likely increase rates again before the end of 2023 and keep them at that level—the highest in 20 years—well into 2024. Higher interest rates make it more expensive for consumers to buy a home or car and for businesses to make investments, which, in turn, is supposed to reduce hiring, blunt wage growth, and depress spending. The entire point is to cool prices by grinding the economy to a halt. So far, the post-pandemic economy has been resilient, but there’s a limit to how long rates can go up—and stay up—before their full pain is felt.

Of course, there are risks in the other direction as well. An external shock—such as spiking oil prices in response to war in the Middle East—could send inflation shooting up again. But some economists find that possibility far less threatening than an overcorrection. Mark Zandi, the chief economist at Moody’s Analytics, told me an overcorrection is “the No. 1 risk I worry about.” Justin Wolfers, an economics professor at the University of Michigan, refers to it as the fear “that keeps me up at night.”

The economy, in other words, appears to be gliding smoothly toward the kind of “soft landing” that until recently seemed unimaginable. But if the Fed continues to raise interest rates, or just keeps them too high for too long, it risks driving the plane off the runway. “Paul Volcker was my mentor,” Goolsbee told me. “But what people have to understand is that this isn’t the 1970s.”

The Fed might not be able to so easily suppress a half century’s worth of inflation-fighting instincts. Although inflation has come down considerably in recent months, it is currently running at about 3 or 4 percent, depending which measure you use, which is still above the Fed’s 2 percent target. Everyone would prefer to avoid a recession, but some officials think that this “last mile” of inflation will never come under control as long as the economy maintains its current strength. As Fed Chair Jerome H. Powell put it in a speech yesterday, “Additional evidence of persistently above-trend growth, or that tightness in the labor market is no longer easing, could put further progress on inflation at risk and could warrant further tightening of monetary policy.”

[Annie Lowrey: The annoyance economy]

To this line of thinking, the traditionalist view has not been disproved; the past year of disinflation was just the easy part. The hard part is taming the labor market, which is still running too hot for comfort. The price of goods has returned to the pre-pandemic trend, but the price of services—which is driven by wages—has remained higher. Inflation hawks point to the September jobs report, which showed about 336,000 jobs added to the economy. Analysts had been expecting half that. And though inflation expectations have remained calm, the traditionalists worry how long that can last if the Fed doesn’t hit its stated target of 2 percent.

Some experts have suggested that the 2 percent number is an arbitrary goal. Goolsbee isn’t one of them. When I asked him whether the Fed would ever consider easing up on its inflation target, he replied, “Over my dead body.” Where he parts ways with some of his colleagues is in his optimism about inflation’s true trajectory. In his view, the current stickiness is a statistical artifact; the data simply haven’t caught up to reality.

Here’s why: The cost of housing is a huge component of overall inflation statistics. But because of the idiosyncratic way in which housing inflation is calculated, the official figures tend to lag current prices by about a year. That means today’s housing numbers are likely still reflecting the market of 2022. Once they’ve adjusted, inflation should get closer to the 2 percent target on its own, even if the labor market stays hot—and on that front, there’s evidence that wage growth is cooling, too, even as the economy adds jobs.

The story of Paul Volcker slaying the inflation dragon is the Federal Reserve’s founding myth. The belief in a mechanical relationship between inflation and unemployment is the closest thing it has to sacred law, and raising interest rates to cool prices is the essence of what it does. Economists like Goolsbee are asking the Fed to put all of that to the side. To suspend disbelief. To abandon its secular creed. To erase Volcker’s legacy from their memories, if just for a moment. If the central bank can achieve what Goolsbee calls the “golden path” between inflation and recession, he believes this moment will be just as defining for the Fed as the 1970s were. Only this time, its legacy will be defined by restraint rather than relentlessness.

“No central bank has ever cut inflation this much without a deep recession,” he told me. “So it’s not just a soft landing. It’s a landing from a higher level than anyone has been able to pull off. And I think we can do it.”

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The incentives of social media have long been perverse. But in recent weeks, platforms have become virtually unusable for people seeking accurate information.

First, here are four new stories from The Atlantic:

The sociopaths among us—and how to avoid them MAGA Bluey is stressing people out. What Sidney Powell’s plea deal could mean for the Fulton County case against Trump Hamas’s hostage-taking handbook says to “kill the difficult ones” and use hostages as “human shields.”

Dangerous Incentives

“For following the war in real-time,” Elon Musk declared to his 150 million followers on X (formerly Twitter) the day after Israel declared war on Hamas, two accounts were worth checking out. He tagged them in his post, which racked up some 11 million views. Three hours later, he deleted the post; both accounts were known spreaders of disinformation, including the claim this spring that there was an explosion near the Pentagon. Musk, in his capacity as the owner of X, has personally sped up the deterioration of social media as a place to get credible information. Misinformation and violent rhetoric run rampant on X, but other platforms have also quietly rolled back their already lacking attempts at content moderation and leaned into virality, in many cases at the cost of reliability.

Social media has long encouraged the sharing of outrageous content. Posts that stoke strong reactions are rewarded with reach and amplification. But, my colleague Charlie Warzel told me, the Israel-Hamas war is also “an awful conflict that has deep roots … I am not sure that anything that’s happened in the last two weeks requires an algorithm to boost outrage.” He reminded me that social-media platforms have never been the best places to look if one’s goal is genuine understanding: “Over the past 15 years, certain people (myself included) have grown addicted to getting news live from the feed, but it’s a remarkably inefficient process if your end goal is to make sure you have a balanced and comprehensive understanding of a specific event.”

Where social media shines, Charlie said, is in showing users firsthand perspectives and real-time updates. But the design and structure of the platforms are starting to weaken even those capabilities. “In recent years, all the major social-media platforms have evolved further into algorithmically driven TikTok-style recommendation engines,” John Herrman wrote last week in New York Magazine. Now a toxic brew of bad actors and users merely trying to juice engagement have seeded social media with dubious, and at times dangerous, material that’s designed to go viral.

Musk has also introduced financial incentives for posting content that provokes massive engagement: Users who pay for a Twitter Blue subscription (in the U.S., it costs $8 a month) can in turn get paid for posting content that generates a lot of views from other subscribers, be it outrageous lies, old clips repackaged as wartime footage, or something else that might grab eyeballs. The accounts of those Twitter Blue subscribers now display a blue check mark—once an authenticator of a person’s real identity, now a symbol of fealty to Musk.

If some of the changes making social-media platforms less hospitable to accurate information are obvious to users, others are happening more quietly inside companies. Musk slashed the company’s trust-and-safety team, which handled content moderation, soon after he took over last year. Caitlin Chin-Rothmann, a fellow at the Center for Strategic and International Studies, told me in an email that Meta and YouTube have also made cuts to their trust-and-safety teams as part of broader layoffs in the past year. The reduction in moderators on social-media sites, she said, leaves the platforms with “fewer employees who have the language, cultural, and geopolitical understanding to make the tough calls in a crisis.” Even before the layoffs, she added, technology platforms struggled to moderate content that was not in English. After making widely publicized investments in content moderation under intense public pressure after the 2016 presidential election, platforms have quietly dialed back their capacities. This is happening at the same time as these same platforms have deprioritized the surfacing of legitimate news by reputable sources via their algorithms (see also: Musk’s decision to strip out the headlines that were previously displayed on X if a user shared a link to another website).

Content moderation is not a panacea. And violent videos and propaganda have been spreading beyond major platforms, on Hamas-linked Telegram channels, which are private groups that are effectively unmoderated. On mainstream sites, some of the less-than-credible posts have come directly from politicians and government officials. But experts told me that efforts to ramp up moderation—especially investments in moderators with language and cultural competencies—would improve the situation.

The extent of inaccurate information on social media in recent weeks has attracted attention from regulators, particularly in Europe, where there are different standards—both cultural and legal—regarding free speech compared with the United States. The European Union opened an inquiry into X earlier this month regarding “indications received by the Commission services of the alleged spreading of illegal content and disinformation, in particular the spreading of terrorist and violent content and hate speech.” In an earlier letter in response to questions from the EU, Linda Yaccarino, the CEO of X, wrote that X had labeled or removed “tens of thousands of pieces of content”; removed hundreds of Hamas-affiliated accounts; and was relying, in part, on “community notes,” written by eligible users who sign up as contributors, to add context to content on the site. Today, the European Commission sent letters to Meta and TikTok requesting information about how they are handling disinformation and illegal content. (X responded to my request for comment with “busy now, check back later.” A spokesperson for YouTube told me that the company had removed tens of thousands of harmful videos, adding, “Our teams are working around the clock to monitor for harmful footage and remain vigilant.” A spokesperson for TikTok directed me to a statement about how it is ramping up safety and integrity efforts, adding that the company had heard from the European Commission today and would publish its first transparency report under the European Digital Services Act next week. And a spokesperson for Meta told me, “After the terrorist attacks by Hamas on Israel, we quickly established a special operations center staffed with experts, including fluent Hebrew and Arabic speakers, to closely monitor and respond to this rapidly evolving situation.” The spokesperson added that the company will respond to the European Commission.)

Social-media platforms were already imperfect, and during this conflict, extremist groups are making sophisticated use of their vulnerabilities. The New York Times reported that Hamas, taking advantage of X’s weak content moderation, have seeded the site with violent content such as audio of a civilian being kidnapped. Social-media platforms are providing “a near-frictionless experience for these terrorist groups,” Imran Ahmed, the CEO of the Center for Countering Digital Hate, which is currently facing a lawsuit from Twitter over its research investigating hate speech on the platform, told me. By paying Musk $8 a month, he added, “you’re able to get algorithmic privilege and amplify your content faster than the truth can put on its pajamas and try to combat it.”

Related:

This war shows just how broken social media has become. How to redeem social media

Today’s News

After saying he would back interim House Speaker Patrick McHenry and postpone a third vote on his own candidacy, Representative Jim Jordan now says he will push for another round of voting. Sidney Powell, a former attorney for Donald Trump, has pleaded guilty in the Georgia election case. The Russian American journalist Alsu Kurmasheva has been detained in Russia, according to her employer, for allegedly failing to register as a foreign agent.

Evening Read

Illustration by Ben Hickey

The Annoyance Economy

By Annie Lowrey

Has the American labor market ever been better? Not in my lifetime, and probably not in yours, either. The jobless rate is just 3.8 percent. Employers added a blockbuster 336,000 jobs in September. Wage growth exceeded inflation too. But people are weary and angry. A majority of adults believe we’re tipping into a recession, if we are not in one already. Consumer confidence sagged in September, and the public’s expectations about where things are heading drooped as well.

The gap between how the economy is and how people feel things are going is enormous, and arguably has never been bigger. A few well-analyzed factors seem to be at play, the dire-toned media environment and political polarization among them. To that list, I want to add one more: something I think of as the “Economic Annoyance Index.” Sometimes, people’s personal financial situations are just stressful—burdensome to manage and frustrating to think about—beyond what is happening in dollars-and-cents terms. And although economic growth is strong and unemployment is low, the Economic Annoyance Index is riding high.

Read the full article.

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Read. “Explaining Pain,” a new poem by Donald Platt:

“The way I do it is to say my body / is not my / body anymore. It is someone else’s. The pain, therefore, / is no longer / mine.”

Listen. A ground invasion in Gaza seems all but certain, Hanna Rosin discusses in the latest episode of Radio Atlantic. But then what?

Play our daily crossword.

P.S.

Working as a content moderator can be brutal. In 2019, Casey Newton wrote a searing account in The Verge of the lives of content moderators, who spend their days sifting through violent, hateful posts and, in many cases, work as contractors receiving relatively low pay. We Had to Remove This Post, a new novel by the Dutch writer Hanna Bervoets, follows one such “quality assurance worker,” who reviews posts on behalf of a social-media corporation. Through this character, we see one expression of the human stakes of witnessing so much horror. Both Newton and Bervoets explore the idea that, although platforms rely on content moderators’ labor, the work of keeping brutality out of users’ view can be devastating for those who do it.

— Lora

Katherine Hu contributed to this newsletter.

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Americans are losing their faith in higher education. In a recent Wall Street Journal poll, more than half of respondents said that a bachelor’s degree isn’t worth the cost. Young people were the most skeptical. As a recent New York Times Magazine cover story put it, “For most people, the new economics of higher ed make going to college a risky bet.” The article drew heavily on research from the Federal Reserve Bank of St. Louis, which found that rising student-loan burdens have lowered the value proposition of a four-year degree.

American higher education certainly has its problems. But the bad vibes around college threaten to obscure an important economic reality: Most young people are still far better off with a four-year college degree than without one.

Historically, analysis of higher education’s value tends to focus on the so-called college wage premium. That premium has always been massive—college graduates earn much more than people without a degree, on average—but it doesn’t take into account the cost of getting a degree. So the St. Louis Fed researchers devised a new metric, the college wealth premium, to try to get a more complete picture. They compared the wealth premium of people born in the 1980s with that enjoyed by earlier cohorts. Because those earlier generations have been alive longer and thus have had more time to build wealth, the researchers projected out the future earnings of the younger cohort. They found that the lifetime wealth premium will be lower for people born in the 1980s than for any previous generation.

[Annie Lowrey: Why you have to care about these 12 colleges]

That analysis, however, suffers from a key oversight. In estimating the lifetime earnings for people who are now in their 30s and early 40s, the researchers assumed that the college wage premium will stay constant throughout their life. In fact, it almost surely will not. For Baby Boomers, Gen Xers, and older Millennials, the college wage premium has more than doubled between the ages of 25 and 50, from less than 40 percent to nearly 80 percent. Likewise, the college wealth premium for past generations was initially very small but grew rapidly after age 40. History tells us that the best is yet to come for today’s recent graduates.

Wages grow faster for more-educated workers because college is a gateway to professional occupations, such as business and engineering, in which workers learn new skills, get promoted, and gain managerial experience. Most noncollege workers, in contrast, end up in personal services and blue-collar occupations, for which wages tend to stagnate over time.

For example, truck drivers in the U.S. earn an average annual salary of about $48,700, according to my analysis of data from the American Community Survey. (Full-time unionized drivers can make much more, but they’re in the minority.) That’s close to the average annual income for four-year college graduates working full-time at age 24. It’s easy to see why some young people might look at those numbers and opt against borrowing money to attend a four-year college. Yet the math will be very different a decade later. For example, average earnings in business occupations, where almost everyone has a four-year degree, are about $50,000 at age 24, but double to $100,000 by age 50. Average earnings for truck drivers grow from about $36,000 to only about $51,000 over the same period. The earnings advantage for college graduates increases steadily with work experience, until eventually they are earning nearly twice as much as workers with only a high-school degree.

The debt timeline is basically the reverse. Most federal student loans have a repayment period of only 10 years, which begins shortly after graduation. (The exception is income-based and income-driven repayment loans, which charge a share of borrowers’ discretionary income for 20 to 25 years. These are about a quarter of all loans today and were less common several years ago. Private loans vary in term length, but most are about 10 years.) This means that the typical college graduate must completely repay their loans by their mid-30s. In other words, the earnings premium from a bachelor’s degree is smallest in the years when graduates are also paying down their debts. We are effectively asking a 17-year-old high-school student to delay gratification until age 35 or later—longer than they have been alive. But the rewards are worth it.

Of course, we cannot know for certain whether today’s college graduates will experience the same earnings growth as past generations. The tightness of the post-pandemic labor market has created upward pressure on wages in sectors such as retail and hospitality, leading to especially strong wage growth for less-educated workers. As a result, the college wage premium has been falling since 2020, after three decades of growth. Could this time be different?

In 1976, the Harvard economist Richard Freeman published a book called The Overeducated American. The labor market for young college graduates had been particularly depressed in the early 1970s, with the wage premium falling by more than 10 percentage points in less than a decade. As a result, college enrollment began to decline, reversing what had been a steady positive trend. Freeman argued that society was investing too much in higher education, and that college was no longer worth it for the marginal student.

His timing was impeccably bad. Shortly after the book’s publication, the college wage premium rose rapidly, increasing by more than 20 percentage points from 1976 to 1988. At age 50, the college graduates who entered the labor market in the 1970s were earning about 70 percent more than their less-educated contemporaries. College had been worth it after all; it just felt riskier and took longer to pay off.

We appear to be in a similar moment today. Despite the bad vibes around higher education, the fastest-growing occupations that do not require a college degree are mostly low-wage service jobs that offer little opportunity for advancement. Negative public sentiment might dissuade some people from going to college when it is in their long-run interest to do so. The potential harm is greatest for low- and middle-income students, for whom college costs are most salient. Wealthy families will continue to send their kids to four-year colleges, footing the bill and setting their children up for long-term success.

[Sanjay Sarma and Luke Yoquinto: The Toyota Corolla theory of college]

Indeed, highly educated elites in journalism, business, and academia are among those most likely to question the value of a four-year degree, even if their life choices don’t reflect that skepticism. In a recent New America poll, only 38 percent of respondents with household incomes greater than $100,000 said a bachelor’s degree was necessary for adults in the U.S to be financially secure. When asked about their own family members, however, that number jumped to 58 percent.

As a labor economist, I have argued elsewhere that the U.S. should invest more in workforce development to increase economic mobility for people who don’t have a four-year degree. At the same time, public investment in higher education, including making public-college tuition free, would help more students afford getting a degree. Until that happens, however, young people must play the cards they’ve been dealt. Taking on debt to go to college can feel risky, especially for first-generation students who don’t have examples from their own family, or for any young person without generational wealth. But the long-term value of a bachelor’s degree is much greater than it initially appears. If a college professor or pundit tries to convince you otherwise, ask them what they would choose for their own children.