In the summer, as life slows down, there is space to reflect on fundamental issues. One of the key puzzles occupying my mind of late is the disconnect between widespread political dysfunction and relatively strong economic and financial market performance.

Today, the world's major economies are experiencing a steady recovery, despite the occasional setback. To be sure, economic performance is far from reaching its full potential: depending on where one looks, one can find output gaps, excess leverage, fragile balance sheets, under-investment, and unfunded longer-term non-debt liabilities. Still, financial markets show no signs of convulsion, even as monetary stimulus is gradually withdrawn.