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-The Energy in the Nondurable Goods Index
-The Phase-plane Plot of Acceleration Versus Velocity
-Plotting the Depression and World War II
-The Mid 70's: A time of Structural Change
-What have we seen?



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Phase-Plane Plotting of the Goods Index
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Expertise: Intermediate

The Mid 70's: A time of Structural Change
Three years in which important changes occur are 1974 to 1976, plotted in Figure 7. The Vietnam War was concluded in this period, and the OPEC oil crisis also contributed to a change in economic patterns. One consequence was the decrease in the size of the fall loop. What we cannot see in this small time window, though, is that fundamental changes initiated in the mid-1970s persist to the present day.

Figure 7: Phase-plane plots for 1974 to 1976, when the production cycles are changing
rapidly. The three years are plotted in blue, green, and red, respectively.

What is happening now? Figure 8 shows that the production cycles are now much smaller than they once were. We still see fairly large seasonal oscillations, but they are now much smoother, and hence show less variation in velocity and acceleration.

Figure 8: Phase-plane plots for 1996 to 1998, showing the greatly reduced
variability of current production cycles.

Are this loss of dynamism and these structural changes due to the fact that production is no longer so dependent on manpower? Or, perhaps, that it is more tightly controlled by information technology? On the other hand, it may be simply that far more nondurable goods are now manufactured outside the United States.

A further clue to recent changes is that in the early 1990s, personal computers and other electronic goods were classified as durable. Consequently, one sees in the comparable index for durable goods a strong increase in its typical slope at that point. Although it is true that electronic goods usually last more than two years, the pace of technological development in this sector has meant that, effectively, consumers have tended to discard these items within two years because they become obsolete. This loss of electronic goods in the nondurable goods index has surely diminished its energy.

Another important trend is the movement of a great deal of the nondurable goods production offshore. Until relatively recently, it was mostly durable goods that were manufactured abroad, but now we move much more of our raw materials to places where labour is cheap and then bring them back again for consumption.

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