In the 1970s and early 1980s, the US economy slowed largely due to what has been called "stagflation", a combination of high unemployment and high inflation. IOTL, Ronald Reagan and Conservatives at large responded to this with Supply-Side economics, and despite the criticisms of "Reaganomics" it's been largely credited with the economic boom of the latter part of the 80s, into the 1990s.
But let's say Reagan hadn't been elected, or Mondale became President in 1984. What would the liberal response to stagflation have looked like? Would it have been that different from Supply-Side?
 
In the 1970s and early 1980s, the US economy slowed largely due to what has been called "stagflation", a combination of high unemployment and high inflation. IOTL, Ronald Reagan and Conservatives at large responded to this with Supply-Side economics, and despite the criticisms of "Reaganomics" it's been largely credited with the economic boom of the latter part of the 80s, into the 1990s.

In history's which seek to exonerate Reagan as a great economist and pad his legacy as far beyond what the man actually achieved. Most other historians are more nuanced, observing that Reagan's gargantuan government deficit spending during the 1980s ended up providing exactly the same kind of Keynesian stimulus as in the 30's through 60's. While it is true that Keynesian economics failed to predict stagflation that does not mean it was supply-side economics which solved it.
 

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There was no stimulative response that would work. Remember, Keynesianism was not dismantled (perhaps in the 80's) but really it has had a major revival in the western world since 2008.
 
What broke US inflation wasn't Reagan, it was Paul Volcker (appointed by one Jimmy Carter). The 1980s upturn was simply the Federal Reserve deciding to relax monetary policy.
 
From The Invisble Bridge it seems that liberals supported more price controls plus public works programs to reduce unemployment. Also some old-school Democrats like Scoop Jackson supported, at least in 1974, the nationalization of the energy companies. I doubt these would be the best solutions to the stagflation problem though and may be too unemployment-focused and so increase inflation.
 
In the 1970s and early 1980s, the US economy slowed largely due to what has been called "stagflation", a combination of high unemployment and high inflation. IOTL, Ronald Reagan and Conservatives at large responded to this with Supply-Side economics, and despite the criticisms of "Reaganomics" it's been largely credited with the economic boom of the latter part of the 80s, into the 1990s.
...

I dont remember much of a economic boom in the late 1980s, the construction industry was stagnated, the Savings & Loan portion of the banking industry collapsed. The local factories were losing contracts and using temp layoff and extended maint shutdowns to reduce short term labor costs. This was the era the growth for the US middle class slowed or ceased. Repair businesses were flourishing because folks were buying less new. A friend hired for his shoe repair business & watched two of the four independent shoe retailers close along with a couple shoe sales franchises in the malls. My home town was relatively prosperous for the Midwest, but vacant retail space down town grew to 25% of available. Similar levels of vacancy growth could be seen in the malls & roadside commercial strips.
 
. . . While it is true that Keynesian economics failed to predict stagflation . . .

https://books.google.com/books?id=q...ce of crude oil. American consumers"&f=false

This standard macroeconomic textbook is saying something quite different.

Chapter 1. The cause. An "Adverse Shift in Aggregate Supply," such as an abrupt rise in the price of oil, causes the supply curve to shift inward and that's it. Case closed.

Chapter 2. The remedy, or partial remedies, or amelioration, or improvements, well, that's quite a bit more complicated.
 
P&B%2026.11%20Decrease%20Aggregate%20Supply.jpg

SAS = Short-run Aggregate Supply

The supply curve shifts inward and the new equilibrium point is at a place which is both higher price and lower GDP.
 
screen-shot-2013-03-28-at-2-17-10-pm.png

Please notice that the supply curve is curvy.

I'm not sure what's the significance of setting off Long-Run Aggregate Supply as vertical. (Over time, the total productive capacity of a complex economy certainly does increase.)

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PS I took a grand total of two economic classes in college, certainly not any kind of expert. But if you jump in and take it in bite-sized pieces, you just might surprise yourself. :)
 
https://books.google.com/books?id=qQW0BAAAQBAJ&pg=PA206&lpg=PA206&dq="quadrupled+the+price+of+crude+oil.++American+consumers"&source=bl&ots=E0mgi2mTEB&sig=6QdlY4ZNTGzDYGyTbYlLTw4NEtI&hl=en&sa=X&ved=0ahUKEwj9hqjaiffQAhUN9GMKHZTPA2oQ6AEIHjAB#v=onepage&q="quadrupled the price of crude oil. American consumers"&f=false

This standard macroeconomic textbook is saying something quite different.

Chapter 1. The cause. An "Adverse Shift in Aggregate Supply," such as an abrupt rise in the price of oil, causes the supply curve to shift inward and that's it. Case closed.

Chapter 2. The remedy, or partial remedies, or amelioration, or improvements, well, that's quite a bit more complicated.

So would it be fair to say that, without a rise in the price of oil (or a newly acquired source of oil, say from invading a particular oil-rich nation), stagflation would have been avoided?
 

Deleted member 1487

Just remember that the problem of Stagflation was caused by the oil shortages combined with the Nixon Shocks. Once the oil supply fears cleared up Stagflation ended. It would go away on it's own.
 
So would it be fair to say that, without a rise in the price of oil (or a newly acquired source of oil, say from invading a particular oil-rich nation), stagflation would have been avoided?
Yes.

Even given that a large economy is almost biologically complex with a lot of moving parts, I think it's fair to say that without a rise in the price of oil, we would not have had stagflation.
 
Just remember that the problem of Stagflation was caused by the oil shortages combined with the Nixon Shocks.
Alright, like biology and medicine, a fever combined with somewhat more specific symptoms, probably has more than one potential cause.

But the above case for '73 and '79 is pretty strong that it was a "negative supply shock" with the supply curve moving inward. Maybe '73 has some features that made the economy less resilient and less likely that we could recover in a couple of years by continuing to push the supply curve outward through tech improvements.
 
The Nixon Shock
Bloomberg Businessweek, Roger Lowenstein, August 4, 2011.

https://www.bloomberg.com/news/articles/2011-08-04/the-nixon-shock

. . . [Arthur] Burns didn’t share the rigid Friedman-Shultz belief that the money supply was everything. Burns distrusted single-answer diagnoses and blamed inflation partially on other factors, such as the growing power of labor unions. When even the 1970 recession failed to curb inflation, Burns was stumped. “What the boys around the White House fail to see,” Burns scribbled in his diary, “is that the country now faces an entirely new problem—sizable inflation in the midst of recession.” As Burns would tell a congressional committee, “The rules of economics are not working the way they used to.” Prices were going up even when factories stood idle—a seeming refutation of the economic rules. . .
Okay, so this is the more "mysterious" type of stagflation.
 
https://www.bloomberg.com/news/articles/2011-08-04/the-nixon-shock

. . . in 1978. The following year, with inflation rocketing toward 15 percent, Burns delivered a keynote speech, “The Anguish of Central Banking,” in which he argued that central bankers around the world were failing because elected leaders were unwilling to risk displeasing constituents. The new Fed chief, Volcker, did tame inflation; unlike Burns, he had the fortitude to subject the country to a brutal recession. . .
I passionately disagree with this. And I'll even count myself as an inflation hawk, in that I'll say inflation is one of the five most important economic numbers.

The most important number is GDP growth, at least in my universe! :) And the main tension is how to achieve this while still maintaining plenty good enough environmental protection.
 
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