Yglesias vs DeLong

First Yglesias

Via Ryan Avent, a very informative James Hamilton post on why whether or not oil hits a technical production peak in the near future we should expect to see very little elasticity of supply. That means growth spurts will produce oil price shocks that drag the economy back to the ground. Bad news.

Then DeLong:

And as it turned out to be long and nasty, recent economic theories of macroeconomics have fallen like tropical rain forests. The--already implausible--claims that downturns had real causes? Fallen.

So, we still have one hold out, DeLong, who believes we are in a depression because of psychological shock. The holdouts are the Keynesians who cannot bear the idea of actual shortages of energy. We have Thoma, DeLong and Krugamn still in denial, all of them claiming that 'growth spurts' will not increase energy shortages.

Unfortunately, we now have three years of Keynesian stimulus causing oil price hikes and subsequent contraction of the economy. Their goal, obviously, is a much smaller private sector while central government gets to allocate limited oil.