

Rising gas prices may be to blame for economic doldrums - jseliger
http://www.theatlantic.com/business/archive/2011/10/the-limits-of-stimulus/247178/

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lcargill99
During the original oil shock, consumption dropped by as much as half. Was
there a corresponding drop in quality of life? I would say no. There is
_massive_ shadow-marginal inefficiency in transport, and the signals are
always masked for political reasons.

It is much more likely that the Scott Sumner hypothesis - the oil bump in '08
caused a "false" signal of inflation that the Fed misread as real inflation,
and subsequently tightened the money supply - is true. He will go so far to
say that this may have caused the meltdown itself.

I am a big James Hamilton fan, and I think I see where he's going with this (
we need to expand the money supply ) but this particular correlation is at
best a strawman. It is interesting, but it's pretty clear to me that demand-
destruction for oil is its own good.

It always comes back to Hayek - the knowledge problem will be with us always -
but Hayek didn't have much to say about deflation.

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jseliger
Read the linked paper by James Hamilton too:
<http://dss.ucsd.edu/%7Ejhamilto/Hamilton_oil_shock_08.pdf> . It may turn out
that we simply can't do anything about macro economic performance without
working on energy problems. This kind of information has been circling among
economics bloggers for quite a while but hasn't made much way into the
mainstream.

~~~
pohl
Amory Lovins has an old TED Talk on a plan to get out from under this problem.

[http://www.ted.com/talks/amory_lovins_on_winning_the_oil_end...](http://www.ted.com/talks/amory_lovins_on_winning_the_oil_endgame.html)

More recently, he gave an excellent talk at Berkeley. Don't miss this if you
liked the TED Talk.

<http://www.youtube.com/watch?v=U_EKZvb7gc8>

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saalweachter
This sounds like after-the-fact rationalization of do-nothing-ism.

Conventional, classic macroeconomics has been spot on in predicting this
crisis as it unfolds. Why do we need this extra hypothesis?

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trebor
Y'think?

Most east coast Americans eat salad that comes from the west coast. Now,
driving ~2,600 miles in a truck with an efficiency of ~12mpg will cost $736 at
$3.40/gal. That's just transportation of SALAD. Add that up for everything we
ship around, and you get large expenses that "spread out" over every consumer.

I am convinced that if we ate locally for more and had lower gas prices most
this financial crisis, except with the stupid mortgage crisis, would
evaporate.

~~~
saalweachter
The US DOT limit on tractor trailers is 40 tons. If your average salad-
carrying tractor trailer is hauling 10 tons of salad, and the average serving
size of salad is 1/2 pound, then you will haul 40,000 servings of salad per
tractor trailer.

In this case, your stated fuel costs will add about 1.8 cents to the cost of
each salad.

~~~
trebor
I personally think the cost is 3x that (I doubt a fully loaded Semi gets
12mpg), but when you tack that on top of everything you buy it does affect
market prices.

I think the biggest cost is in commuting/personal travel. I drive ~19mi to
work, 5x weekly, and get 33.55mpg on average (highway&town). This costs me
about $19.28/wk just commuting; driving to church 3x costs me $13.37/wk; going
to a Bible study in the same area costs me $5. This is $37.65/wk just for
scheduled driving in a given week, or about 4% of my net income per pay period
(at $3.40/gal which is lower than average prices here at home).

Dropping gas prices to $3.27/gal costs me $36.26/wk (barely no change). But if
that dropped more steeply, say to $2.50, it'd be $27.71 or 2.95% of my net
income.

I think that a major drop like that would free up ~2% of everyone's net
income. Most people would spend more which would help our consumption-based
economy; hopefully others would save it rather than spend it and turn our
negative savings rate around.

