To understand the economy, you've got to resort to psychology. Throughout the recovery, forecasters — including those at the U.S. Federal Reserve and the International Monetary Fund — have repeatedly overestimated the economy's strength.

They've predicted faster economic growth than has occurred.

The main reason for the errors, I have argued, is that the forecasters have underestimated the influence of the financial crisis and Great Recession on people's confidence. Lower confidence reduced Americans' willingness to spend.