Canaries

This is John Quiggin's afterthought, that I quoted yesterday:

The neutral value changes gradually over time in response to a variety of factors, but is sufficiently stable that it can be regarded, for most purposes, as a long-term average, typically assumed to be in the range 1.5 per cent to 3.5 percent.

Quiggin was talking about the interest rate controlled by the central bank. But if we left off the range of values and just looked at the words about how the value is stable and only changes gradually, he could have been talking about any of a number of "neutral" or "natural" rates. He could even have been talking about the velocity of money.

I just wanted to say, in response to Quiggin's thought, that there have been sudden shifts in a lot of "sufficiently stable" variables in our not-too-distant past. Variables are called "variables" for a reason.

The gradual changes that come before sudden shifts are canaries. Indicators. Warning signs. They are not something to be thought of as stable. They can't be safely ignored. Can it be that economists don't know this?

// Related post: Two Thought Experiments