In the wake of the Great Recession, I think we need another change in regime. We can't continue with an approach that always delivers on price stability but frequent leads to prolonged spells of mass unemployment. But I think to push for that regime change credibly, people need to acknowledge what went wrong in the past and need to explain why it won't happen again. I would say, for example, that one of the great virtues of the more globalized economy of 2012 rather than 1972 is that the freer flow of goods across borders makes inflation much less likely.
There is an old saying that the "heroes of the last war are the villains of the next one". The reason is that wars happen infrequently, are heavily analyzed, and everyone had figured out how to overcome the winning tactics of the previous war (well, at least insofar as the next war involves any sort of parity). There is also a real tendency to overcompensate for the failures of the last approach and, in the process, create an extreme in the other direction. This is especially true if the last approach ended in a crisis.
The current view of fiscal policy is that price stability is really important. As a consequence, people are willing to tolerate a lot of unemployment to ensure it. In some countries that might be okay, but the United States of America runs on the idea that safety nets are disincentives to work. The consequence of a weak safety net is that prolonged periods of high unemployment create an amazing amount of misery. It is past time that we acknowledge this and seek a new approach before a crisis brings another swing that is too extreme.
