Shocks, Crises, and False Alarms
The late 2010s fed into stark predictions of a recession by 2022, based mainly on the view that elevated economic debt levels would cause significant pain as interest rates rose. However, by the end of 2023, it became clear that the economy was more resilient than many expected. The dynamics then—and now—are far more complex. Shocks, Crises, and False Alarms, released in October 2024 by Paul Swartz and Philipp Carlsson-Szlezak, highlights the prevalence of false alarms alongside every real crisis.
Paul Swartz, a Senior Economist and Executive Director at Boston Consulting Group (BCG) for Macroeconomics, and Philipp Carlsson-Szlezak, BCG’s Global Chief Economist and Managing Director & Partner, argue that rational optimism is not naive, and excessive pessimism is not sophisticated. Their book pursues two objectives: first, how to analyze macroeconomic risks, and second, how to envision the future of the macroeconomic system.
Shocks, Crises, and False Alarms warns that assuming the worst and forcing analysis to fit that mental model does not help identify genuine risks. To counter this tendency, the authors offer three core concepts:
Master-model mentality cripples economic judgment.
Doom-mongering is inevitable—in good times, recession risk will always seem more compelling than upside potential; in crises, systemic collapse will draw more attention than recovery.
Economic eclecticism should be the starting point—understand how the system works, identify drivers and dynamics, and assess what structural shifts would be required to alter those dynamics. A "blinking dashboard" cannot replace sound macro judgment.
Chapter 3 offers a particularly useful framework, emphasizing the need to distinguish between three types of recessions—real, policy-induced, and financial—by analyzing both exogenous and endogenous shocks. The authors also argue that productivity remains the most sustainable driver of growth, directly contributing to per capita gains. They clarify that productivity boosts are not merely about product innovation but about scalable labor-cost reductions that lower prices and raise real incomes, fueling broader economic activity.
Importantly, Shocks, Crises, and False Alarms rejects the notion that technological unemployment is inevitable. While technology's potential for macroeconomic impact is stronger than at any point in a generation, the authors suggest readers expect gradual progress and not sudden breakthroughs. The book also traces the origins of modern stimulus regimes—both tactical and existential—from the Reagan deficits of the 1980s to the 1990s dot-com bubble, the 2000s housing bubble, and the 2010s surge in government debt.
In Chapter 18, the authors argue that leaders should avoid approaching geopolitical risk analysis like corporate strategy, as there is no such thing as a meaningful five-year geopolitical plan. Just as economists cannot consistently predict macro outcomes, geopolitical experts cannot consistently forecast major events. Instead, executives and investors should focus on assessing the economic impact of geopolitical shifts, rather than attempting to predict precise timelines or events.
Despite increasing geopolitical friction, Swartz and Carlsson-Szlezak remain optimistic about growth in regional trade, even if global value chains shorten. On the role of the U.S. dollar as the world’s reserve currency, they conclude that no serious contender currently combines deep debt markets, credible institutions, and open capital markets, leaving the dollar dominant for the foreseeable future.
The authors forecast the 2020s as an "era of tightness"—characterized by healthy interest rates, tighter labor markets, and stronger capital expenditures. Unlike the 2010s, when cheap labor and low capex defined the corporate playbook, the 2020s will be marked by relative labor scarcity, robust capex, and fuller employment of both labor and capital. This period may come to resemble the 1950s and 1960s more than the decade that preceded it. As companies adjust to repatriating production and strengthening supply chains, the resulting constraints will reinforce this era of tightness. The authors also caution that if a great-power conflict occurs, the primary economic impact will come from rapid shifts in business rules—not from systemic collapse.
Shocks, Crises, and False Alarms is a timely and relevant book for navigating today’s global and local uncertainties. It reminds readers not to take headlines—or economic models crafted to fit prevailing narratives—too seriously. Ultimately, Swartz and Carlsson-Szlezak reinforce that navigating risk is not about eliminating it but understanding and managing it wisely.
