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Paul Krugman and the Dismal Science

Posted by Bill Lee on December 27, 2010 at 02:01 PM

Celebrated economist and NY Times columnist Paul Krugman despairs (despairs?!) over rapidly growing demand taking place in emerging economies. Huh?

The reason? Emerging economies are touching off rapid price rises in commodities such as oil, metals and food .

"What the commodity markets are telling us is that we’re living in a finite world, in which the rapid growth of emerging economies is placing pressure on limited supplies of raw materials, pushing up their prices. And America is, for the most part, just a bystander in this story." 

The implications of this?

This won’t bring an end to economic growth, let alone a descent into Mad Max-style collapse. It will require that we gradually change the way we live, adapting our (Americans') economy and our lifestyles to the reality of more expensive resources.

I think he left out another implication: rising global demand is creating a feast for entrepreneurs, a skill set Americans in particular happen to have an abundance of. Thriving global economies mean markets to sell to. As for the commodity shortages Mr. Krugman warns us about, I predict we'll handily find ways to address those, either by finding more of what we need and/or finding alternatives--as we've seemed to manage to do before. 

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