Question

Robert Higgs’ analysis “Wartime Prosperity?” Explain his analysis that that the low unemployment rate did not increase American’s well-being (3 points). Explain his analysis that the increases in conventionally measured GNP was not an indicator of prosperity (2 points) What are his arguments with respect to the claim that consumption increased (3 points)? What is his conclusion about why people generally believe that WWII was the end of the return of prosperity (2 points)?

Answer 1

Explain his analysis that that the low unemployment rate did not increase American’s well-being (3 points).

Through the war period, rise in the output was used for defense purposes. Hence, per capita consumption of people did not rise during this period.

Explain his analysis that the increases in conventionally measured GNP was not an indicator of prosperity (2 points)

Conventionally measured GDP did not include true prices as restrictions were imposed on the price and rationing was carried out.

What are his arguments with respect to the claim that consumption increased (3 points)?

Overall output increased through war period but per capita consumption did not increase. Unemployment rate fell to 1.2 % from high of 14 % but still consumption was not increased on account of restrictions on consumption and rationing.

What is his conclusion about why people generally believe that WWII was the end of the return of prosperity (2 points)

During the war period, GDP increased by 84 % between 1940 and 1944. It was phenomenal growth which was never experienced before.