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A large component of 70's stagflation was just supply shocks for oil. Why this never gets brought up, or is just brushed aside casually is beyond me. > do mod

A large component of 70's stagflation was just supply shocks for oil. Why this never gets brought up, or is just brushed aside casually is beyond me. > do modern industrial economies actually tend to oscillate between demand constrained and supply constrained failure modes This is probably a pretty good way to look at it. The solution is something like http://en.wikipedia.org/wiki/Functional_finance http://en.wikipedia.org/wiki/Functional_finance The meat: 1. The government shall maintain a reasonable level of demand at all times. If there is too little spending and, thus, excessive unemployment, the government shall reduce taxes or increase its own spending. If there is too much spending, the government shall prevent inflation by reducing its own expenditures or by increasing taxes. 2. By borrowing money when it wishes to raise the rate of interest and by lending money or repaying debt when it wishes to lower the rate of interest, the government shall maintain that rate of interest that induces the optimum amount of investment. 3. If either of the first two rules conflicts with principles of 'sound finance' or of balancing the budget, or of limiting the national debt, so much the worse for these principles. The government press shall print any money that may be needed to carry out rules 1 and 2

api 12y ago
True, and I'm sure the fact that we've likely passed peak conventional oil is a contributing factor to the current malaise. In both cases there was probably a physical underpinning, but economic policies could indeed have helped. In the case of the 70s oil shocks, having more investment capital available allowed more investment in new capacity. Today having more consumer capital available would spur adoption of electric cars, rooftop solar, LED lights, and other consumer next-generation energy technologies that are required to help us shift consumption away from being so dependent on oil. In other words I think today's energy problems are -- paradoxically -- also a demand problem. We need more demand, not less, to drive the adoption of alternatives.
abledon 12y ago
> A large component of 70's stagflation was just supply shocks for oil. Why this never gets brought up, or is just brushed aside casually is beyond me. This is how David Graeber starts his book "Debt: The first 5000 years"
TheOtherHobbes 12y ago
>A large component of 70's stagflation was just supply shocks for oil. Why this never gets brought up, or is just brushed aside casually is beyond me. It's politically expedient to forget it - just as it's politically expedient to forget that the people causing the oil shocks and the people who benefited from them politically seemed (and continue to seem) to have some interesting relationships. Keynes is in danger of being written out of history, in the same way that dissidents like Henry George were. I'm not sure how many people realise the extent to which anti-Keynesian narratives were deliberately promoted and funded after WWII, especially in Chicago. The fact that Keynes is no longer considered an orthodox policy source is not an accident.

api 12y ago

True, and I'm sure the fact that we've likely passed peak conventional oil is a contributing factor to the current malaise. In both cases there was probably a physical underpinning, but economic policies could indeed have helped. In the case of the 70s oil shocks, having more investment capital available allowed more investment in new capacity. Today having more consumer capital available would spur adoption of electric cars, rooftop solar, LED lights, and other consumer next-generation energy technologies that are required to help us shift consumption away from being so dependent on oil. In other words I think today's energy problems are -- paradoxically -- also a demand problem. We need more demand, not less, to drive the adoption of alternatives.

abledon 12y ago

> A large component of 70's stagflation was just supply shocks for oil. Why this never gets brought up, or is just brushed aside casually is beyond me. This is how David Graeber starts his book "Debt: The first 5000 years"

TheOtherHobbes 12y ago

>A large component of 70's stagflation was just supply shocks for oil. Why this never gets brought up, or is just brushed aside casually is beyond me. It's politically expedient to forget it - just as it's politically expedient to forget that the people causing the oil shocks and the people who benefited from them politically seemed (and continue to seem) to have some interesting relationships. Keynes is in danger of being written out of history, in the same way that dissidents like Henry George were. I'm not sure how many people realise the extent to which anti-Keynesian narratives were deliberately promoted and funded after WWII, especially in Chicago. The fact that Keynes is no longer considered an orthodox policy source is not an accident.