Explaining the Pain

All this said, I believe today's inflation will ultimately speed the adoption of technologies that can fight it. The higher prices get in the atoms economy, where things get more expensive every year, the more incentive there is to move goods and services to the bits economy, where things get cheaper. How high will airfares have to get (think they're high now? Just wait for new carbon taxes to kick in) before you invest in good videoconference gear and skip the flight altogether? How high will gas prices get before you decide to work a few more days a week from your fully wired home office, or skip the mall and shop online from home? The best way to lower energy prices is to cut demand.

In a world where seemingly everything is getting more expensive, the price of digital technology continues to fall and the differences between those two economies are growing. If getting rich was the incentive to go digital a decade ago, saving money may be an even stronger motivation this time.
—Anderson is editor in chief of wired magazine.

No Time To Be Tight-Fisted
Robert Hormatsand Jeffrey Currieon why our long-term underinvestment is at the root of oil and food inflation.

There are several causes of the current outbreak of worldwide inflationary pressures. Of these the most visible and powerful is the surge in oil and food prices. Most press accounts focus on rapidly rising demand in emerging economies as the primary reason for this surge, but a deeper and longer standing problem is the sluggish growth in the capacity to produce more energy.

In many countries, insufficient sums of money have been devoted to expanding energy production capacity, and in numerous cases government-imposed barriers inhibit the flow of capital and expertise to areas where they could reduce energy supply constraints. Meanwhile, farm land is increasingly used to produce fuel, rather than food, which drives up agricultural commodity prices, and government subsidies promote inefficient energy use.

In the U.S., the mid-1970s oil crisis led to a striking increase in the efficiency of oil use and sizable investments in new capacity. This was followed by a series of crises in the early 1980s and more conservation. Then, as prices fell, Americans became complacent about gasoline use and developing energy alternatives—and major governmental initiatives petered out—even as dependence on foreign oil mounted.