Reply To: Kayension predictions for 1946.


Standard statistics like GDP are unreliable indicators of standards of living during wartime. For example, the government imposed wage and price controls during the war.

For an analysis of the wartime economy, see the article by Robert Higgs.

Moreover, GDP includes government expenditures. So as the government drastically cut its expenditures after the war, GDP fell. This decline is an artifact of the way GDP is calculated. As government expenditures were falling, however, consumption was increasing. Here is Gene Smiley’s analysis of the wartime economy and transition to peacetime.