Energy Price Increase Effects

Greater energy conservation, continued increases in productivity and real wages, and sustained economic growth are goals pursued today by almost all national governments. Since the 1973 OPEC energy price increases, however, disappointing economic trends in the United States, Canada and elsewhere have focused attention on the extent to which these goals are compatible. In particular, the post-1973 slowdown in the rate of growth of labor productivity is viewed by many as contributing considerably to recent acceleration of price inflation.~ In this paper I examine the role of energy price increases in the productivity slowdown in U.S. manufacturing, 1973-77. The manufacturing sector is of particular interest since it is energyintensive and important; in 1974 it accounted for 23.4 percent of U.S. gross domestic product, but consumed 36.2 percent of total U.S. energy.2 Although post-1973 energy market developments have heightened professional interest in energy-economy interactions, this issue is by no means new. More than a century ago in 1865 a melancholy William Stanley Jevons reckoned