“What do shipping containers and artillery shells have in common? This isn’t a trick question. The answer is that both have been in very short supply at some point over the past three years. And these shortages tell us something disturbing about modern economies: They aren’t nearly as flexible as many people, myself included, had thought.
About those artillery shells: Like many people, I’ve been closely following the war in Ukraine. Everyone knows the broad outlines of the story so far: Vladimir Putin’s Russia invaded in February of last year, expecting a quick victory over Ukraine’s much weaker army, but the Ukrainians, astonishingly, defeated the would-be blitzkrieg and the war has turned instead into a brutal slugging match.
No matter how valorous, Ukrainians on their own would have no chance in such a match. But they have received crucial aid from Western nations that see Ukraine — as do I — as a crucial front in the defense of democracy.”
“. . . . That is, in contrast to the story told by Samuelson’s curve, it may be very hard to produce more guns in the short run even if you’re willing to give up a lot of butter.
The revelation that economies aren’t as flexible as we thought has many implications for policy. Supply-chain constraints weren’t the sole reason inflation took off in 2021, but they were clearly an important part of the story, with implications for future monetary policy. And in general, economic inflexibility suggests that we should be taking more precautions against the possibility of future disruptions, especially for strategic goods, but possibly more widely.
But all of that demands a much longer discussion. The main point for now is that it turns out that the Rolling Stones may have had it backward: Modern economies generally do a very good job of getting people what they want, but sometimes you just can’t get what you need.”