As I read the article in the New Yorker by James Surowiecki about the economic impact of high oil prices, I found myself wondering: has wishful thinking replaced factual analysis as the new form of reporting? I have to explain the surreal Surowiecki piece to make myself clear. First, Surowiecki points out that past oil price spikes have had disasterous consequences for the American economy. Next, he points out that oil prices have been surging in the last few months. (Indeed, I just paid $4.19 per gallon to fill my car up with regular gas this morning.) But what does Surowiecki take away from this: basically, things are not that bad and there is no need to worry. Here's the reasons why. First, in the past, high gas prices have led to a decline in the purchase of SUV's with a resulting production decline by the auto makers. that decline led to massive layoffs which further hurt the economy. Now, the automakers have already laid off thousands of workers and are not producing as many vehicles, so the impact will not be that great. It hit me that Surowiecki would probably use the same logic to argue that a crop failure would have less impact in a society that was already starving; after all, he would say, it cannot get much worse than it already is.
Second, gasoline price hikes only have big impact when the price seems really high to the average person. Since "we all" remember the $4.00 per gallon gas of 2008, the present price is no big deal. Huh? It is a big deal to me. Not that long ago, I was paying around $2.50 per gallon and now the price is up about 80%. It is inconceivable to me that people will not be upset by this just because it got this bad once before. Today's presidential approval poll from Rasmussen seems to support my view. obama is now down to the lowest level of people who strongly approve of his performance ever. Only 19% of the folks think that he is doing an excellant job. And what has changed in the last few weeks to lower his ratings? Answer: oil prices have soared. It seems that many people care about this. Of course, I can hear Surowiecki's response: Obama's low approval ratings are not important. After all, not that long ago, the same approval rating hit 20%, so everyone remembers that and the 19% number is no big deal. I suggest that Surowiecki keep this kind of reasoning in mind in November 2012 and that he then sees how far it will get him and his fellow liberals.
The truly sad thing is that a magazine that purports to be intellectual would print such nonsense. Are the editors totally devoid of reason? I guess that the New Yorker is trying to emulate the New York Times.
1 comment:
I disclose up front that I am generally a fan of Surowiecki. I have yet to read this piece and am only commenting from your summary.
I think that he makes a very good point about expectations. If you experienced a high price in the past and then saw it come down substantially, you’re less likely to conclude that a high price is here to stay. If you had a pain in your stomach which got better and then a few years later you get the same pain, you’re less likely to be alarmed since you had it before, recovered and it didn’t come back for years. A series of snow storms? The first one causes more angst than the later ones. Experiencing anything makes the reaction the next time less intense.
Obama’s low poll numbers are probably in part due to gas prices. But he didn’t exactly enamor himself to people with his handling of Libya, with being very weak on the shut-down talks, with housing getting still worse very recently, and with his flip-flop on Guitmo (most support trying KSM in a military tribunal, but most dislike flip-flops). If you want to use the bad poll numbers to support your view, what would be more relevant (though not dispositive if other things were going on) is how the polls changed the last time and the time before that as oil rose, rather than just that they are bad now.
While your first point seems correct, there is a valid related argument: auto makers are making and people are buying more efficient cars than in the past and fewer SUVs on a % basis. So the average cost of gasoline per mile is probably significantly less today absolutely and especially inflation-adjusted or as a % of average income than it was in past energy spikes.
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