Energy Prices and Productivity Growth

The sharp decline in economic growth since 1973 presents a problem comparable in scientific interest and social importance to the problem of unemployment in the Great Depression of the 1930s. Conventional methods of economic analysis have been tried and have been found to be inadequate. This paper outlines a new framework for understanding the slowdown in economic growth. We find that the fall in U.S. economic growth since 1973 has been due to the dramatic decline in productivity growth. Within the new framework we identify higher energy prices as an important determinant of the productivity slowdown.