So why don’t we just abandon these simple rules and embrace optimal control?

The answer is that, for all our intellect—and I’ll admit, economists are very sure their collective intellect is almost too much for the world to handle—there’s a limit to how much we truly know about the future. We have forecasts, which are based on sound data and analysis. But they’re only forecasts, and the unexpected can always erupt. I don’t have a 100 percent degree of certainty where housing prices are going. I don’t know for sure what’s going to happen with China. I wouldn’t bet my life on what the ECB or Bank of Japan is going to do. We may think we have it all figured out, but sometimes economists’ track records leave something to be desired. So there is a risk with the optimal control approach that we’ll believe our theories and our models too much, and that can lead us astray. There is a need for humility and to recognize our limitations.

ROBIN HARDING: Mr. Chairman, your inflation forecasts never get back to 2 percent in the time horizon that you cover here, out to 2016. Given that, why should we believe the Fed has a symmetric inflation target? And in particular, why should we believe you're following an optimal policy, optimal control policy, as you've said in the past, given that that would imply inflation going a bit above target at some point? BERNANKE: Well, again, these are individual estimates, big standard errors implicitly around them, and so on. We do think that inflation will gradually move back to 2 percent, and we allow for the possibility, as you know, in our guidance that it could go as high as 2.5 percent. Even though inflation has been quite low in 2013, let me give you the case for why inflation might rise. First, there are some special factors, such as health care costs and some other things, that have been unusually low and might -- and might be reversed. Secondly, if you look at the fundamentals for inflation, including inflation expectations, whether measured by financial markets or surveys, if you look at growth, which we now anticipate will be picking up both in the U.S. and internationally, if you look at wages, which have been growing at 2 percent and a little bit higher, according to many indicators, all of these things suggest that inflation will gradually pick up. But what I tried to emphasize in my opening remarks -- and which is clear in our statement -- is that we take this very seriously. It's not easy to -- inflation cannot be picked up and moved where you want it. It takes -- it requires, obviously, some luck and some good policy. But we are very committed to making sure that inflation does not stay too low, and we are continuing to monitor that very carefully and to take whatever action is necessary to achieve that. ROBIN HARDING: And on optimal control? BERNANKE: Well, even under optimal control, it would take a while for inflation -- inflation is quite -- can be quite inertial, can take quite a time to move. And the responsiveness of inflation to increasing economic activity is quite low, so -- and particularly given an environment where we have falling oil prices and other factors that are contributing downward forces on inflation, it's -- it's difficult to get inflation to move quickly to target. But we are, again, committed to doing what's necessary to get inflation back to target over the next couple of years.