The Rogoff doctrine - Paul Krugman's blog

Summary:
Paul Krugman takes issue with Rogoff's call for "a couple of years of sub-trend growth to rebalance commodity supply and demand at trend price levels." The relative rise in price of oil and commodities is a result of their limited supply in the face of rapid global economic growth. It is the way the markets are supposed to work. Since when, Krugman asks, does economic analysis say that the way to deal with limited supplies of one resource is to reduce employment of other resources, so that the relative price of the limited resource returns to “trend”? (Published: 30/07/08)