These charts of the economy during World War II are reassuring

One of the first things you learn in econ class is that there is no free lunch. If you want more than one thing, you have to do less of another. More guns, less butter. It is based on the assumption that the economy usually operates near its “production possibility limit”, beyond which it cannot go.

Mike Konzal and JW Mason of the liberal Roosevelt Institute challenged that idea in a Guest essay in the New York Times last week, using World War II as an example. We are taught that Americans had to tighten their belts to free up resources for war in World War II, “but in reality, on an aggregate level, there was no decline in domestic consumption during the war years,” he wrote. .

The lesson they take is that America doesn’t have to settle for unpleasant tradeoffs because the economy is far from the hypothetical production possibility limit that most people think. Don’t be too quick to apply the brakes when the economy starts to roar, he argues. “To pull off a roaring 2020, we must be prepared to manage a surge, not fight it.”

Wait, though. Could his World War II story be true? What about the stagnation in automobile production during the war years? What about rationing meat, gasoline, sugar, etc.? Backyard Victory Garden that was planted by people to provide extra food for soldiers?

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