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But the time scale of oil price increases is much faster than that of reorganization of the economy, so in the short term one can assume that the zeroth-order impact of an oil price change, especially given the low price elasticity of oil demand, is to add/subtract the extra cost of the exported/imported oil to the GDP.

When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes
by Migeru (migeru at eurotrib dot com) on Thu May 29th, 2008 at 05:39:55 PM EST
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Circumstances can elicit changes that are shown to work.  Under the pressure of necessity these can quickly be widely adopted.   Schedule shifting was shown to greatly improve traffic flow in the 1984 L.A. Olympics.  After that experience many employers became more flexible in their hours.  Telecommuting was shown to be feasible after earthquakes in Northridge in 94 and in Oakland later.  I would also point out how quickly both England and Germany adapted production to the effects of bombing in WWII.  If one is staring into the abyss....

Necessity is the mother of innovation and adaptation as well as of invention.

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri May 30th, 2008 at 01:31:39 AM EST
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