The paper by Olivier Blanchard and John Simon analyzes the long and large decline in U.S. output volatility over the past half-century. It argues that this decline is not due to a lack of major adverse shocks but rather a steady reduction in output volatility starting in the 1950s, interrupted in the 1970s and early 1980s, and resuming in the late 1980s and 1990s. The standard deviation of quarterly output growth has decreased by a factor of three, which is sufficient to explain the increased length of economic expansions. The authors identify several proximate causes for the decline in output volatility, including reduced volatility in government spending, consumption, and investment, and a change in the sign of the correlation between inventory investment and sales in the last decade. They also find a strong relationship between output volatility and inflation volatility, with the interruption of the trend decline in output volatility in the 1970s and early 1980s associated with a large increase in inflation volatility. The paper also examines the components of GDP, finding that changes in composition have had little effect on the overall decline in output volatility. The most significant contributors to the decline are the reduced volatility of consumption and investment, and a shift in inventory investment behavior in the 1990s. The authors conclude that the decrease in output volatility is due to a combination of factors, including changes in financial markets, better countercyclical policy, and structural changes in the economy. They suggest that further research is needed to understand the deeper causes of the decline in output volatility. The paper also notes that the decrease in output volatility has not been reflected in a parallel decrease in asset price volatility, and that the relationship between output volatility and inflation volatility remains an important area of study.The paper by Olivier Blanchard and John Simon analyzes the long and large decline in U.S. output volatility over the past half-century. It argues that this decline is not due to a lack of major adverse shocks but rather a steady reduction in output volatility starting in the 1950s, interrupted in the 1970s and early 1980s, and resuming in the late 1980s and 1990s. The standard deviation of quarterly output growth has decreased by a factor of three, which is sufficient to explain the increased length of economic expansions. The authors identify several proximate causes for the decline in output volatility, including reduced volatility in government spending, consumption, and investment, and a change in the sign of the correlation between inventory investment and sales in the last decade. They also find a strong relationship between output volatility and inflation volatility, with the interruption of the trend decline in output volatility in the 1970s and early 1980s associated with a large increase in inflation volatility. The paper also examines the components of GDP, finding that changes in composition have had little effect on the overall decline in output volatility. The most significant contributors to the decline are the reduced volatility of consumption and investment, and a shift in inventory investment behavior in the 1990s. The authors conclude that the decrease in output volatility is due to a combination of factors, including changes in financial markets, better countercyclical policy, and structural changes in the economy. They suggest that further research is needed to understand the deeper causes of the decline in output volatility. The paper also notes that the decrease in output volatility has not been reflected in a parallel decrease in asset price volatility, and that the relationship between output volatility and inflation volatility remains an important area of study.