Simon has a good discussion on whether fiscal or monetary policy is better at stabilizing output. I'd suggest, though, that neither is in practice particularly good and that what we need instead are stronger automatic stabilizers.

I say so for a simple reason: recessions are unpredictable. Back in 2000 Prakash Loungani studied the record of private sector consensus forecasts for GDP and concluded that "the record of failure to predict recessions is virtually unblemished" - a fact which remained true thereafter.

The ECB, for example, raised rates in 2007 and 2008, oblivious to the impending disaster. The Bank of England did little better. In February 2008, its "fan chart" attached only a slight probability to GDP failing in year-on-year terms at any time in 2008 or 2009 when in fact it fell 6.1% in the following 12 months. Because of this, it didn't cut Bank Rate to 0.5% until March 2009.

Given that it takes around two years for changes in interest rates to have its maximum effect upon output, this means that monetary policy does a better job of repairing the economy after a recession than it does of preventing recession in the first place. And of course, as there's no evidence that governments can predict recessions any better than the private sector or central banks, the same is true for fiscal policy.

All this suggests to me that if we want to stabilize in the face of unpredictable recessions, we need not just discretionary monetary or fiscal policy but rather better automatic stabilizers.

In this context, I've long been attracted to Robert Shiller's proposals for macro markets. These would allow people vulnerable to recession - such as those in cyclical jobs or with small businesses - to buy insurance against a downturn. I can see why some of you might be sceptical about this: the sort of people who'd sell insurance against recession are the sort who'd be unable to pay out in the event of one. (As with all markets, so much hinges on precise details).

If private sector insurance markets don't exist, the job of stabilization is better done by government. The most obvious measures here include more progressive taxation - so that falls in income are shared with government - and higher welfare benefits, both for the unemployed and for those who suffer drops in hours.

There's something else. Another way to stabilize the economy is to ensure that there are fewer institutions that propagate risk - ones that turn small downturns into big ones. This means ensuring that banks are strong and well-capitalized, so that bad loans don't deplete capital so much as to prevent lending to other companies. Whether this is currently the case is questionable: UK banks capital ratios, for example, are still below the levels recommended by Admati and Hellwig.

It is measures such as these, rather than discretionary macro policy, which perhaps offers better hope for genuinely stabilizing output and jobs.

I suspect, though, that I'm making two more general points here.

One is that macroeconomic stability isn't just a matter for macro policy. It's also about the quality of institutions - the nature of the welfare state; how far financial institutions propagate risk; whether we have markets to pool risks or not; and so on.

The other is that the inability of policy-makers (and everybody else) to predict recessions is not some accidental contingent feature we can abstract from. A lack of foresight is an inherent part of the human condition. Policy must be based upon this big fact. This, of course, applies to much more than just macro policy.