[Ever Since The World Ended Torrent
Laurice Whack
Supply chain disruptions are having a substantial impact on current economic conditions. Economy-wide and retail-sector inventory-to-sales ratios have hit record lows; homebuilders are reporting shortages of key materials; and automakers do not have enough semiconductors. Elevated consumer demand is adding fuel to the fire. Travel demand, for example, has returned much more sharply than expected, which is straining airline operations. Similarly, total vehicle sales in April more than doubled from a year prior, which is leading to empty dealer lots. The combination of a spike in consumer demand and a supply chain that is not fully operational has contributed to rising prices.
Milton Friedman and Anna Jacobson Schwartz (1980) observe that World War II ushered in a period of inflation comparable to the inflationary episodes that occurred during the Civil War and World War I.[1] Prices also surged after World War II ended. In 1947, inflation jumped to over 20 percent, as shown in Figure 1. According to the Bureau of Labor Statistics (BLS), the rapid post-war inflationary episode was caused by the elimination of price controls, supply shortages, and pent-up demand.
This inflationary episode was caused by a booming economy, which increased prices. From 1965 through 1969, for instance, real quarterly GDP growth averaged 4.8 percent at an annual rate. Inflation fell after President Nixon instituted a freeze on wages and prices.
This fifth inflationary episode occurred when Iraq invaded Kuwait, leading to the first Gulf War. The price of crude oil increased significantly due to heightened uncertainty, leading to a short bout of high inflation.
In 2008, the CPI rose above 5 percent for two months due to skyrocketing gas prices. One barrel of West Texas Intermediate crude oil cost more than $140 in July 2008 compared to $70 just a year earlier.
The period right after World War II potentially provides the most relevant case study, as the rapid post-war inflationary episode was caused by the elimination of price controls, supply shortages, and pent-up demand. Figure 2 shows the change in prices in the five years following World War II.
One substantial difference between the inflation dynamics of World War II and today is that price controls were a wartime policy tool that were not implemented during COVID. Those price controls reduced the price level 30 percent below what it would have been otherwise, according to Paul Evans (1982). When the caps were lifted in 1946, prices climbed significantly. For example, food prices alone rose 13.8 percent in July after food price controls expired on June 30th.
According to Benjamin Caplan (1956), the inflationary episode after World War II ended after two years as domestic and foreign supply chains normalized and consumer demand began to level off. (Caplan also observes that private fixed investment started to decline, which contributed to the decline in prices and caused the economy to fall into a mild recession, with real GDP declining by 1.5 percent).
Today, we have metrics measuring longer-run inflation expectations in the form of surveys and market-based measures. If transitory inflation pressures were spilling over into longer-run expectations, we would anticipate seeing these measures rise to historically high levels. However, as Figure 4 below shows, both market-based measures like the five-year, five-year inflation break-evens, and survey-based measures like the ten-year expectations in the Survey of Professional Forecasters, have broadly recovered from pandemic-lows to levels more consistent with pre-pandemic expectations.
No single historical episode is a perfect template for current events. But when looking for historical parallels, it is useful to concentrate on inflationary episodes that contained supply chain disruptions and a spike in consumer demand after a period of temporary suppression. The inflationary period after World War II is likely a better comparison for the current economic situation than the 1970s and suggests that inflation could quickly decline once supply chains are fully online and pent-up demand levels off. The CEA will continue to carefully gauge the trajectory of inflation.
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Calculating the number of people who have ever lived is part science and part art. No demographic data exist for more than 99% of the span of human existence. Still, with some assumptions about population size throughout human history, we can get a rough idea of this number: About 117 billion members of our species have ever been born on Earth.
Any estimate of the total number of people who have ever lived depends essentially on three factors: the length of time that humans are thought to have been on Earth, the average size of the population at different periods, and the number of births per 1,000 population during each of those periods. The estimate, however, does not depend on the number of deaths during any period of time.
In any case, life was short. Life expectancy at birth probably averaged only about 10 years for most of human history. Average life expectancy in Iron Age France (from 800 B.C.E. to about 100 C.E.) has been estimated at only 10 or 12 years. Under these conditions, the birth rate would have to be about 80 live births per 1,000 people just for the species to survive. To put that in perspective, a high birth rate today is about 35 to 45 live births per 1,000 population, and it is observed in only some sub-Saharan African countries.
These short life expectancies mean that the human population had a hard time increasing. One estimate of the population of the Roman Empire, spanning Spain to Asia Minor, in 14 C.E. is 45 million. Other historians, however, set the figure twice as high, suggesting how imprecise population estimates of early historical periods can be.
By 1800, however, the world population passed the 1 billion mark and has since continued to grow to its current 8 billion (our most recent estimate as of 2022). This growth is driven in large part by advances in public health, medicine, and nutrition that have lowered death rates, allowing more people to live far into their reproductive years.
One complicating factor is the pattern of population growth. Did it rise to some level and then fluctuate wildly in response to famines and changes in climate? Or did it grow at a constant rate? We cannot know the answers to these questions, although paleontologists have produced a variety of theories. For the purposes of this exercise, we assumed a constant growth rate applied to each period up to modern times. Birth rates were set at 80 per 1,000 population annually through 1 C.E. and at 60 per 1,000 from 2 C.E. to 1750. Rates then declined to below the 20s by the modern period (see Table 1).
As new archaeological discoveries are made and analyzed using increasingly innovative methods, our understanding of human population history will likely expand further, allowing us to improve on this ever-intriguing proposition!
Toshiko Kaneda is a technical director, demographic research at PRB; Carl Haub is a former senior demographer at PRB and is also the author of the original version of this article in 1995.
Editor's note (11/22/2023): Over the years, we have heard from readers who tell us that they have seen this article being cited by people who deny the reality or seriousness of human-caused global warming. To make it harder for anyone to mischaracterize this article, we are adding this note:
Our 4.54-billion-year-old planet probably experienced its hottest temperatures in its earliest days, when it was still colliding with other rocky debris (planetesimals) careening around the solar system. The heat of these collisions would have kept Earth molten, with top-of-the-atmosphere temperatures upward of 3,600 Fahrenheit.
Even after those first scorching millennia, however, the planet has often been much warmer than it is now. One of the warmest times was during the geologic period known as the Neoproterozoic, between 600 and 800 million years ago. Conditions were also frequently sweltering between 500 million and 250 million years ago. And within the last 100 million years, two major heat spikes occurred: the Cretaceous Hot Greenhouse (about 92 million years ago), and the Paleocene-Eocene Thermal Maximum (about 56 million years ago).
What the collision that spawned Earth's Moon may have looked like. Collisions between Earth and rocky debris in the early solar system would have kept the surface molten and surface temperatures blistering. Image courtesy NASA.
Even after collisions stopped, and the planet had tens of millions of years to cool, surface temperatures were likely more than 400 Fahrenheit. Zircon crystals from Australia, only about 150 million years younger than the Earth itself, hint that our planet may have cooled faster than scientists previously thought. Still, in its infancy, Earth would have experienced temperatures far higher than we humans could possibly survive.
A geologic history of Earth since its formation 4.6 billion years ago, divided by eon and period, and showing fossils typical of a given period. Fossils reveal not only ancient plants and animals, but also ancient climates. Artwork Ray Troll, 2010. Used with permission.
Rock formation in Namibia that shows a type of rock that only forms in warm water (cap dolostone) lying directly over a type of jumbled sedimentary rock, dated to 635 million years ago, that is commonly found at the margin of glaciers (diamictite). Image from teaching slides available at SnowballEarth.org.
The fact that these thick, calcium-rich rock layers sat directly on top of rock deposits left behind by retreating glaciers indicate that temperatures rose significantly near the end of the Neoproterozoic, perhaps reaching a global average higher than 90 Fahrenheit. (Today's global average is lower than 60F.)
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