I wonder if the oil shocks of the 70s had anything to do with it. Nahhhhhh, couldn't be.

Just maybe it was Peak Oil ... America peaked in 1970. Add this to the debt burden left by Viet Nam, the 2 oil shortages and you have a big hole in economic viability ...

We know now that most of the growth from the 80's on was on the back of the unprecedented growth of debt leading to the current massive $50+ trillion in aggregate debt ... as we sold off our productive economy to become a financial economy we embraced the FIRE sectors and rentier profit centers.

Looking back we can see that 2% or so of GDP every year was in reality the accumulation of debt. In these last stages of recently over $2 in debt growth was needed to support every $1 in GDP growth ... in other words the snake was eating its tail.

There is very little difference nwobetween the Washington Post and WSJ editorial pages on economic issues, and Robert Samuelsonin particular has been drifting to the right with his social network. His "fresh-water" economists friends must have told him this as one of the articles of faith he needs to adopt in order to join their cult. As with any most ideologies, neo-classical economics no longer needs data or facts since they have found the revealed truth.

One more reasonable hypothesis I have heard is this was a consequence that followed from the recovery of the economies of Europe and Japan from WWII. Also, post-colonial economies started to transition from pre-industrial to industrial. All this incrasingly drew investment away from the United States to these other, more profitable locals. At the same time the dollar became overvalued, as manifested by the repeated dollar-gold crisises of the 1960s, finally reaching a peak in Nixon's decision make the dollar a pure fiat currency and completely unentangeled with gold and to go to floating exchange rates. All this may have caused a decline in business investment in the U.S. and consequent decline in productivity.

As far as particular administration's policy errors, it was Nixon's Federal Reserve Chairman, Arthur Burns, who inflated the money supply in 1972 to help Nixon's reelection. The following year the oil crisis hit and that began the stag-flation dance that dominated the economy from 1974 to 1981.

This was also the same time the baby boom was pouring into the work force along with much greater participation of women. I again would hypothesize that this sharp growth in the work force, with many inexperienced workers, depressed productivity growth. But "productivity", the reasons for its increases and declines, appears to be one more mysterious areas of economics.

Rick Kane made the comment that Arthur Burns inflated the money supply in order to help Nixon's reelection. This is surely impossible! The federal reserve is a non-political organization. Unlike every other man who has ever lived, the federal reserve chairman has no political aspirations or moral weaknesses. His sole concern is with providing a stable money supply. The American people would never give economy-wrecking power to a single person, unless we knew he meant well.

productivity =
value added per unit of factor input

raise the cost of a factor like oil without being able to raise the output price commensurately and you have declining productivity.

Is Samuelson an economist? Do we have any?

I find economists' notion of productivity confusing. If productivity is essentially output per worker (whether output is expresses as dollars, widgets or a valued added function), productivity seems to be a function of demand for the workers' output as well as the workers' skill, efficiency and creativity. Manufacturers tend to cut production quickly in response to slackening demand in the early stages of a recession, but hold on to their workforce for a longer time in hopes of an upturn in demand, The output per worker drops and productivity therefore declines. Yet the skill, efficiency and creativity of the workforce has not changed. It seems to me that when economists speak of productivity they are referring to an attribute of the enterprise rather than the workforce.

But too often in public statements (by politicians, talking heads and economists too) productivity is spoken of as if productivity is an attribute of the workers rather than the enterprise that employs those workers. In my opinion that adds a false morality to discussions of economic policy that is used to justify unduly harsh judgment and punitive treatment of workers.

Ron--

Productivity works this way. If productivity falls, clearly workers are making too much money. If productivity rises, it's wonderful to see corporations doing so well.

Let CPI prices gradually fall so that consumers can buy the extra goods made available by increased productivity. Don't force consumers to borrow unrepayable sums to buy the

interestnig finance & econ articles

Long-run Phillips curve? If you believe that explanation then they at least contributed to it...

Kennedy cut income taxes on the wealthy.

The real danger is that Dean Baker will go too far in the opposite direction, and NOT want to discuss the problems of the Johnson administration, like health care inflation, that arose not long after Medicare began. Because Johnson was in such a hurry to pass Medicare that he left loopholes which the doctors and hospitals promptly began to exploit. This lead to a situation that was harmful to workers, harmful to government, harmful to social justice.

Now I worry that a new expansion of Medicare will be quick and ill-managed, and thus lead to new exploitations and injustice.

Is the UPA government dancing to the tunes of industrialists and market speculators?
The inflation is touching all time high. The poor are finding difficulty in living.Why not the government take drastic measures to help the needy?

ACTUALLY, Samuelson is following in the footsteps of Alan Greenspan in the famous "economics lesson" to Bill Clinton in December of 1992...

Here's a description from an article I and Carlos Liard-Muriente wrote in 2005

Woodward (1995, 2001) gives a brief but powerful glimpse of perhaps the most significant meeting that shaped the economic agenda for the Clinton Presidency. According to Woodward’s account, Greenspan gave the President-elect an extremely important economics lesson at that meeting.

...

Greenspan’s reasoning as to why long-term interest rates were so high [in 1992] and why Fed policy could not lower them is also worth repeating:

The long-term rates … were an unusual 3 to 4 percent higher than the short-term fed funds rate, at about 7 percent. The gap between the short-term rate and the long-term rate... was an inflation premium being paid for one simple reason. The lenders of long-term money expected the federal deficit to continue to grow and explode. They had good reason, given the double-digit inflation of the late 1970s and the expanding budget deficits under Reagan. They demanded the premium because of the expectation of new inflation.

...

But how good was this “economics lesson” as Woodward calls it that Greenspan gave to Clinton? First of all, the historical evidence presented is woefully incomplete. Consider Greenspan’s explanation of why an alleged inflation premium had to be paid on long-term borrowing. He blamed that on “the double-digit inflation of the late 1970s and the expanding budget deficits under Reagan”

...

How do the two events Greenspan alluded to constitute reasons for lenders to demand and borrowers to pay an inflation premium?
The double-digit inflation of the 1970s occurred before the expanding budget deficits under Reagan. They were associated with dramatic increases in oil and energy prices. During the 1980s, by contrast, oil and energy prices were falling relative to prices in general. Furthermore, there was virtually no acceleration of inflation as a result of the Reagan deficits. The rate of inflation was 4.3 % or lower from 1984 through 1988 despite the fact that deficits remained at high levels as a percentage of GDP until 1986. After reaching rates above 5.5% per year between 1973 and 1982, inflation was below 5% from 1983 through 1991 (with a one year spike at 5.4% in 1990) after which it fell below 3%.

What could Greenspan have been talking about?

A clue can be found in a different version of the same conversation, described by the same author, Woodward (1995). In this description of the “economics lesson” the historical evidence is presented differently: “The double-digit inflation of the late 1970s had been induced by the budget deficits from the Vietnam War.” This can help explain the connection between the experience of double-digit inflation in the 1970s and the presumed impact of the Reagan deficits. Adding this version of the discussion to the one in Woodward (2001) leads to the following analysis:

1) The budget deficits from the Vietnam War (1966-68) had led to inflation in the late 1970s.

2) Decision-makers in 1993, 94, etc. would look at the Reagan deficits of the 1980s and reason that by the end of the 1990s, these budget deficits would have produced another round of double-digit inflation.

3) Thus, they were insisting on a relatively high inflation premium.

SEE it's OBVIOUS ...

Teach a parrot to say "supply and demand" and it's an economist.

Teach a parrot to say "deficits produce high interest rates" and it can be a Central Banker ...

i nominate Samuelson for the "NO BALLS" prize. In his NYTimes column yesterday, Paul Krugman, a real economist and Nobelist, points the finger at Reagan for many of our current ills.

"For the last 35 years economists have struggled to find the explanation for the sharp slowdown in productivity growth, from close to 3.0 percent annually to 1.5 percent annually"

Ummm ... maybe because the "productivity slowdown" was a data artifact?

Between 1950 and 1975, real GDP per capita grew 71%. Between 1975 and 2000, it grew 74% ... essntially identical. So the so-called productivity slowdown never hit the bottom line.

Robert Samuelson’s not an economist, but he plays one in the Washington Post.

I guess there's no more crisis anymore, huh? no more recession? all
done. Problem fixed byminting a trillion dollars out of thin air. Happy days are here again.
yay i love joblessrecoveries. I love outsourcing. i love hyperinflation. I love huge
deficits. I love fearmongering pandering politicians, I love $4 gas and 140 oil. I love
making petro dictators rich

good articles http://www.iamned.com

I bet it's because neither JFK nor LBJ raided Social Security, thus preventing later generations from... oh, fuck, I don't know and I don't care; Samuelson's about as sensible as the goddamn underpants gnomes when it comes to rational, plausible theories of causation.

The Vietnam war is a pretty good candidate as a cause of lowered productivity.

Austin Powers with his time machine going back in time to get his Economic mojo.

In "Beyond the Wasteland," Bowles, Gordon and Weisskopf say that the causes of the productivity slowdown in the '70s were threefold:

1. Workers were increasingly resistant to working in unsafe conditions, but employers were willing to go to war with unions rather than negotiate workplace safety.

2. At the end of two decades of economic reconstruction following WWII, Japanese and European economies began seriously competing with the U.S.

3. A firmly established OPEC raised the price of oil and the costs of production, especially for established, less energy-efficient production processes.

"The costs of maintaining private power and privilege ultimately overtaxed the resources and flexibility of the U.S. capitalist economy," they wrote.

Women entering the workforce in large numbers would tend to decrease output per manhour, due to the law of diminishing returns.

the oil shocks of the 70s had anything to do with it.

Great!Thank you!