1. The moving off the gold standard
2. A large number of women started entering the workforce essentially doubling the supply of labor.
3. The rise of MBAs and downsizing really became big.
4. Outsourcing and off shoring started to be introduced during this time
5. The 70's stagflation where we say inflation and high interest rates.
These all seem to be plausible factors to me.
https://www.congressionalresearch.org/TransparencyProblem.ht...
As stated in a comment below: > The post-war growth in America was largely driven by cheap and abundant domestic oil... The oil crises of 1973 and beyond were the proximate result. But our economy as a whole never really recovered;
While lots of things contributed, this is almost certainly the case. Energy is an input into everything. Our current standard of living exists mainly due to energy and figuring out productive/efficient ways to consume energy.
For example if we retained all of our knowledge, all of our productive know how, but were banned from using fossil fuels and electricity we'd be essentially back to pre-industrial standards of living. When you think about it, it's self-evident, but we can't do anything modern without consuming enormous amounts of energy. Transportation, shipping, computing, agriculture, communication, heating manufacturing all of these are essentially energy consumption endeavors.
More expensive energy means all of these factors because significantly more expensive. The cost of your food goes up if every input is now paying more for energy. If maintaining a standard of living is now more expensive then cost of labor goes up without any improvement in standard of living. This drives inflation. Increasing the price of energy probably is likely a more broad economic driver of inflation than lowering interest rates. Lowering interest rates drives asset price increases heavily, but much less so on commodity and day to day price increases. Eventually those asset price increases work their way back to housing and then drive labor, but it's not very direct. Increasing the cost of energy drives up the price of everything. The only thing that tops it is direct giving of money to people.
The 1970s oil shocks cost us an enormous amount in our standard of living and drove pure inflation. Just like the oil price increases of the past few years (along with supply/labor shortages) drove our recent bout of inflation. Oil dropped in early 2020 and so did inflation. Oil peaked in mid 2022 and so did inflation. Energy prices drive your economy - anything that notably increases the cost of energy will have ripple effects on the rest your economy.
I've found two interesting books so far: - Oil: A Beginner's Guide by Vaclav Smil - Energy and Civilization: A History by Vaclav Smil
https://www.youtube.com/watch?v=wGt4XwBbCvA
It meanders a bit for the first 5-7 mins, but does a decent job of making the argument. Min 40 also has another pretty good slide.
It does go into covering recommendations which I'm not necessarily recommending, but it does accurately summarize our economy as one of energy transformation.
The best analogy in it is this. Right now if we need to do construction and dig a 10ft x 10ft x 10ft hole we can pull out a backhoe and be done in a min. If we with all of our current knowledge had to do it without consuming energy we'd be digging by hand with a shovel, and no faster than someone pre-industrial would. When you start looking at every industry you come to the same conclusion. All of our technological know how boils down to just better ways to be more productive in converting energy. But fundamentally consuming energy to be productive is the modern economy.
As someone with an econ degree, people advocating for a return to the gold standard are so weird to me. I totally understand people having objections to how central banks manage the money supply and the impacts that has on the economy, but that doesn't mean we should give up control of it completely.
It reminds me of the 2008 housing crisis when people saw a regulation failure and their proposed response was to remove even more regulation. It would be like your home being broken into and deciding the solution is to stop locking your doors instead of trying to find a better lock. It is both defeatist and it does nothing to actually improve the situation.
Advocate for better policy. Don't advocate for no policy. The gold standard is effectively no policy because it gives control of the money supply over to control of the gold supply and gold can be both lost and found which won't happen in ways that actually support the economy.
I mean, I understand. People really like simple things they can understand. And people hate inflation. It's clearly a bad idea, but I understand the appeal if you were raised in a blue-collar household and think debt is evil.
I think you're probably thinking about it wrong. It's not a conventional policy proposal. I think the main factor is just naked mistrust of people like you (people with an econ degree, etc), leading people to seek out simple solutions you have no control over.
Another factor is people just getting high on pure ideology, and losing interest in solving actual problems in the pursuit of that ideology.
>The gold standard is effectively no policy because it gives control of the money supply over to control of the gold supply.
Hayek (he too had an econ degree I believe) could argue that advocating for the gold standard isn't necessarily advocating for "no policy." It is advocating for a different kind of policy, one that places more trust in market mechanisms rather than central planning.
>Advocate for better policy.
No matter how good of a policy you have for predicting Roulette numbers, your policy will be just as good as choosing at random, and most likely worse. Hayek would argue that there was a "knowledge problem" and no amount of econ degrees can solve it.
I don't think Hayek had an economics degree, but in 1974 he did earn the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel:
https://www.nobelprize.org/prizes/economic-sciences/1974/hay...
Yes, this was why I said "effectively no policy" and compared it to removing regulation in the wake of 2008. It isn't literally "no policy" in the same way that anarchy is still technically a governing philosophy. But it is still effectively the same as no policy by taking a laissez-faire approach.
>No matter how good of a policy you have for predicting Roulette numbers, your policy will be just as good as choosing at random, and most likely worse. Hayek would argue that there was a "knowledge problem" and no amount of econ degrees can solve it.
This is what I described as defeatist. The economy isn't roulette. In roulette, it is impossible to observe, react, and predict. I don't believe that is true of the economy. It seems borderline silly to suggest we can't observe an economic trend and react to it.
Oh, yeah, we can react. The same way you start betting on red after you see 3 reds in a row.
That isn't true with the economy. For example, unemployment numbers in one month are strongly correlated with the numbers in both the previous and next month. This is obvious just looking at a graph of the unemployment rate[1]. I can say with a high level of confidence that the rate for September will be in the 3.5%-4% range because it has been that way since 2022. Can you honestly look at that data and tell me it is as random as roulette?
[1] - https://www.bls.gov/charts/employment-situation/civilian-une...
These couple of articles are a good starting point:
- https://en.wikipedia.org/wiki/Economic_calculation_problem
- https://en.wikipedia.org/wiki/Austrian_school_of_economics
Because it can?
Because it should?
Why does the Fed not fix the price of bread?
That is roughly in line with BTC inflation at the moment, and also, as it happens, central bank inflation targets (expectations of anything more would lead people to buy gold, or BTC, or just warehouse cash).
However, the real discipline of a gold standard is to restrict debt (credit). The market for lenders and borrowers (investors) sets the (Wicksellian) interest rate, as any market should.
Governments cannot just print money to run indefinite deficits, to curry favor with the electorate. The democratic desire for low taxes and infinite subsidies cannot be consumated. There has to be fiscal discipline. That is the value of the gold standard.
And if the primary remaining benefit of the gold standard is to rein in government spending, I would simply argue there are other ways to do that. It seems like throwing the baby out with the bath water to give up control of monetary policy in order to better control fiscal policy.
- People ran productive economies for hundreds (thousands?) of years on the Gold standard and it worked.
- It's credibly neutral and no one gets the exorbitant privilege of printing money.
- The supply expands randomly when new deposits are found but this actually works pretty well. As the economy grows we get better at finding gold so prices stay relatively flat in real terms.
- On a gold standard people will waste real resources trying to extract gold to sit in a vault but people waste real resources trying to get printed money too.
The Gold Standard (paper currency backed up rocks) only started in 1870. While gold (and silver) coins were used for some monetary needs, most (local) economies actually ran on credit:
* https://en.wikipedia.org/wiki/Debt:_The_First_5000_Years
> - The supply expands randomly when new deposits are found but this actually works pretty well. As the economy grows we get better at finding gold so prices stay relatively flat in real terms.
No it does not:
* https://en.wikipedia.org/wiki/Great_Bullion_Famine
Neither does it add to financial stability:
* https://www.theatlantic.com/business/archive/2012/08/why-the...
The trigger might have been the end of the gold standard on August 15, 1971. I suspect that we had been going too long without an increase in the gold backing our money supply, and after decades of temporary fixes to the Breton Woods system, things fell apart then. Afterwards, although we moved to a superior fiat currency, most people didn't really believe in the new system for at least a decade. (And the popularity of bitcoin seems to prove that some people still believe that fixed monetary supply is a good thing!)
This allowed the other factors, plus the shock of having to rely on foreign oil, plus the rise of reactionary tax policy, to really mess up the economy in ways that we haven't really fixed yet. Yes, we stabilized the dollar by the early 80s, and yes we have started to ween ourselves off of foreign oil, but the low income taxes on the highest earners remain in place, along with lots of loopholes that make it easy for billionaires to pay almost no taxes.
I don't know the long-term consequences of carrying so much public debt (relative to GDP), but it seems that the only possible way to reduce it (without making things worse) is to tax the rich, which is now going to be incredibly difficult since they have so much power at the moment.
Could be a combination of all of them, could be that a few root causes. Not entierly clear imo.
... Rent-seeking administrative bureaucracies, which seriously dilute the effectiveness of education, healthcare, government, town planning, infrasfucture investment ... everything.
The trends for admin in universities and hospitals is literally off-the-charts exponential. Nothing exponential lasts forever.
Baby-Boomers will all die, eventually, but I hope their parasitic hippie socialism dies with them.