The background level of stress

That is a physiological or biological concept, or it may appear in the other sciences.  It rarely plays a direct role in economics, though I think it is important for understanding regime shifts.

I take any estimate of NAIRU, or indeed many other “steady-state” economic variables, as relative to a particular background level of stress.  In a pandemic, of course, that level of stress may be quite high, and to be clear much of that may stem from the policy response, not just the pandemic itself.

To be sure, I do not see the 2022 level of American stress as “permanent.”  But neither do I hold the 1998 or 2018 backgrounds levels of stress to be “permanent” or “natural” either.  If anything, those lower levels may be the historical outliers.

I think a great deal about what the forthcoming level of background stress will be, but I am quite uncertain about any prediction.  I do know I read a great number of people who either treat it as absurdly high (e.g., the climate doomsayers), or who are implicitly sure it will be quite low.

I believe this concept of background stress, if nothing else, helps you to see what a lot of apparently reasonable predictions can end up being proven wrong.