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Two things tend to get conflated, as I see it: Money and physical resources.

It is a crime when money is scarce, there should be an adequate provision of such to allow the economy to function at full capacity.

That being said, a completely different reasoning should be applied to natural resources: here scarcity can be real. The "Keynesian" inflation of the first oil shocks had nothing to do with keynesian policy, it was because there was real scarcity of a resource and, naturally, inflation ensued.

In my view (someone with little knowledge of economic history) the oil shocks set the stage for the attack on Keynes. Both sides, I believe were wrong: It was not a problem caused by Keynesianism. BUT, there is nothing that Keynes seem to have to offer to solve this problem. Indeed there might be no real solution to this problem: if a resource is scarce, access to it will be problematic. No economist can solve that (only mitigate it).

Even in a sound economy, resource scarcity can happen. And because of this conflation between money and resources it seems that keynesian economists tend to not discuss resource scarcity very much (one cannot print oil).

by cagatacos on Thu Jun 5th, 2014 at 10:47:34 AM EST

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