The End of Bretton Woods and the Oil-Price Shocks of the 1970s
By David Hammes, Douglas Wills
This article appeared in the Spring 2005 issue of The Independent Review
Economists have debated the causal mechanism by which OPEC policies of the 1970s contributed to the decades rise in prices overall, but all sides have assumed that U.S. prices indices are appropriate for computing the real price of oil. This assumption is mistaken and has led economists to overestimate the benefit that the policies brought to OPEC countries and to ignore the effects that ending the Bretton Woods Agreement had on OPEC policies.