Eight Reasons Journalists Should Learn Economics

A writer for MarketWatch.com, which is part of the Dow Jones-Wall Street Journal group — has penned one of the most smugly ignorant articles about our economy I could imagine. The article is titled Eight Reasons You’ll Rejoice When We Hit $8 a Gallon Gasoline.

His reasons include:

1. RIP for the internal combustion engine

2. Economic stimulus

3. Whither the Middle East’s clout

4. Deflating oil potentates

5. Mass transit development

6. An antidote to sprawl

7. Restoration of financial discipline

8. Easing global tensions

Is this satire, or did he write this to prove how stupid he is? Let’s take these reasons one by one.

1. The internal combustion engine has been an incredibly valuable piece of technology, one that is far more energy-efficient than its external combustion predecessor (i.e., the steam engine). Yes, it had some externalities (mainly noise and air pollution), but most of those have been eliminated (mufflers and catalytic converters). Wishing the internal combustion engine away is like wishing away 10 percent of your economy.

2. It is a classic economic fallacy to imagine that tragedy is an economic stimulus. Yes, hurricanes and tornados are followed by an increase in construction, but that doesn’t mean they are positive things. If they were, the government might as well go bomb one city a month just to promote the economy. In reality, the money spent recovering from an earthquake, high fuel prices, or other destructive event is money that otherwise would have been spent on something far more productive.

3. If people are willing to pay $8 for something that cost $1 just a few years ago, then the Middle East, where much of that substance comes from, is only going to be more important, not less. This writer is confusing quantity demand with demand. Though high prices may lead to lower quantities, the demand hasn’t changed.

4. That goes double for oil potentates. If the Saud family and Hugo Chavez were raking it in at $50 a barrel, can anyone really think they will be worse off at $150 a barrel?

5. Our dear writer holds the popular (among journalists, at least) that mass transit equals good, automobiles equal bad. Just what is so virtuous about a transportation system that doesn’t go where you need to go and takes twice as long to get to where it does go? After the automobile replaced mass transit, personal incomes hextupled — and at least half that increase was due to automobility. Anyone who thinks we can go back to mass transit without giving up much of that income is deluding themselves.

6. Again, the writer has fallen for anti-suburb sloganeering. Think of this: Before World War II, American homeownership rates never rose above 45 percent. After the war, they quickly rose to 65 percent. That’s one fifth of the population that owns its own home thanks to sprawl — that is, thanks to low-density suburbs enabled by the automobile. Homeownership means better living conditions, better education for children (yes, children in owned homes do better in school than children in rented homes), and equity to start small businesses. Wishing for an end to sprawl means wishing to put 20 percent of Americans back in poverty.

7. Did that sound extreme? Well, in wishing a “restoration of financial discipline,” our dear writer is effectively wishing that everyone be poorer. Apparently, to him, there is something wrong with a society in which people are so well off that they can afford to spend $20,000 on a car. We will be much better off when we are all too poor (present company excepted, of course) to make such foolish purchases.

Yes, depressions do force people to be more disciplined, but that doesn’t mean you want to live through one. Of course, our dear writer probably doesn’t imagine that a depression will hurt him, only other people who probably deserve it because they drive $20,000 vehicles.

8. What kind of fantasy world does this writer live in where poverty and resource shortages translate to “easing global tensions”? He is clearly ignorant about history as well as economics.

I am not saying the government should take any particular actions to reduce gas prices, like drill the Arctic Wildlife Refuge or start another subsidized synfuel program like the one during the Carter administration. If fuel prices go up, we will deal with it — and probably not in the ways this writer imagines. But to be happy about it reveals an powerful insensitivity to other people’s misery.

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34 thoughts on “Eight Reasons Journalists Should Learn Economics

  1. JimKarlock

    AntoPlanner: 5. Our dear writer holds the popular (among journalists, at least) that mass transit equals good, automobiles equal bad. Just what is so virtuous about a transportation system that doesn’t go where you need to go and takes twice as long to get to where it does go? After the automobile replaced mass transit, personal incomes hextupled — and at least half that increase was due to automobility. Anyone who thinks we can go back to mass transit without giving up much of that income is deluding themselves.

    JK: Not to mention that driving will still be cheaper than light rail at $20/gal – that’s $40/gal with a hybrid and above $80/gal for many LRT systems.

    It is truly a shame that so many illiterate fools infest out popular press (and the planning “profession”.)

    Thanks
    JK

  2. D4P

    If they were, the government might as well go bomb one city a month just to promote the economy

    Shush! Don’t give the current administration any ideas…Ah, who am I kidding. I’m sure they’ve already thought of that. Come to think of it, I believe you’ve just described the War on Iraq.

    Homeownership means…better education for children (yes, children in owned homes do better in school than children in rented homes)

    Because correlation equals causality.

    Wishing for an end to sprawl means wishing to put 20 percent of Americans back in poverty.

  3. D4P

    It is truly a shame that so many illiterate fools infest out popular press (and the planning “profession”.)

    The Daily Ad Hominem Attack. Not sure why the Antiplanner never calls you out for this, but I guess maybe he’s biased.

  4. Dan

    o Close your tag in #7, Randal.

    ———-

    The days of plentiful, cheap energy are not over yet, but we can see the end from here. We will have to adapt. Our society will change, our lives will change. That’s the reality.

    “The real concern,” said Nathaniel Keohane, the head of economic policy and analysis at the Environmental Defense Fund, “should be our vulnerability to $7-a-gallon gasoline that is a function of global demand and stagnant supply.” Goldman Sachs recently suggested that $7-a-gallon gas was conceivable.

    As unpleasant as it’s been, the run-up in gas prices has brought one big advantage. It has shown how flexible American consumers are — how well they can adapt to new prices without turning their lives upside down.

    We will have to learn to be flexible again. Me, I’m going to semiretire in a few years and have a consultancy that will help people learn to grow food in their yards again, as they won’t be running to the store whenever they want and food will be more expensive. Folks with larger yards will be at an advantage wrt growing food, and we can do it cheaply, and without petrochemicals.

    DS

  5. rationalitate

    Yes, it had some externalities (mainly noise and air pollution), but most of those have been eliminated (mufflers and catalytic converters).

    About 30% of all carbon emissions in the US come out of the tailpipe of cars and trucks. You call that mostly eliminated?

    If the Saud family and Hugo Chavez were raking it in at $50 a barrel, can anyone really think they will be worse off at $150 a barrel?

    Some would say that the more energy revenue dictators take in, the more estranged from their citizenry they get, and the higher the chance there is of the people toppling their leader. Have you never heard of the resource curse?

    Just what is so virtuous about a transportation system that doesn’t go where you need to go and takes twice as long to get to where it does go?

    Is this an inherent quality of mass transit, or just how you perceive mass transit because of how it exists in America? Are you so sure that without pervasive mandatory low density regulations, mass transit would still be as useless? Isn’t density a prerequisite for an effective mass transit system? But how could you ever have that if regulations stop the market from building what it wants to build? But of course, the Antiplanner has nothing to say about the kinds of government plans that make it difficult for mass transit to be effective.

    Think of this: Before World War II, American homeownership rates never rose above 45 percent. After the war, they quickly rose to 65 percent.

    So I guess for you, massive government intervention in the mortgage market by offering returning white soldiers cheap mortgages on single-family homes in the suburbs doesn’t count as a plan? The mortgage payments were often cheaper than rent, which, if you think about it, must bear the mark of the government, or else arbitrage would lower the price of rent or raise the price of a mortgage. In a true market for homes, rent would always be cheaper than a mortgage, and the remaining money could be invested. Or are you really only opposed to modern-day plans, and every plan that enabled us to be where we are today must have been a good thing? And why, exactly, is homeownership such a good thing? What’s so great about having large amounts of your money saved in a structure that you can’t take with you and whose price can fluctuate rapidly and is inextricably linked with the local economy? I think that people who bought single-family homes in the far-out suburbs and exurbs of the Sun Belt within the last few years would disagree with your frequent assertions that homeownership is an unalloyed good.

    yes, children in owned homes do better in school than children in rented homes

    Correlation vs. causation, anyone? The Antiplanner isn’t nearly as rigorous in his methods when the topic of discussion isn’t how well the gas tax covers the accounting costs of the roads…

  6. D4P

    So I guess for you, massive government intervention in the mortgage market by offering returning white soldiers cheap mortgages on single-family homes in the suburbs doesn’t count as a plan?

    And don’t forget government investments in highways that fostered suburb creation.

  7. TexanOkie

    I can understand where Mr. Pummer was coming from in his article, and I will say this: he has a refreshingly optimistic outlook for the future, even regarding living and economic prospectives brought about by change in energy sources. You don’t see that very often from either side in this debate.

  8. Dan

    Mortgage and highway subsidies to coerce society into your post facto ideologically preferred patterns: the idea that a trained elite can make better decisions about how your house/building/Interstate Highway system should be built than you can yourself.

    DS

  9. dmccall

    When the economy gets tight, they cut back on things they don’t need, like newspaper subscriptions they really don’t have to buy. The author clearly doesn’t understand how gas prices are the blood of the American economy. Go back to the weeks after Katrina and see what the disturbance to the Colonial pipeline did to the entire nation’s economy.

    I think it is funny how people who live in the older Cameron Village area of Raleigh, 1-2 miles from downtown, consider the rest of us living in sprawl. If we rewind ourselves to the days of the Cameron Plantation, we’d see that development of that land, was indeed sprawl.

  10. Ettinger

    $8 a gallon? Europeans already pay that much. I wonder where do those countries buy their oil from that it’s so expensive? They must be paying close $300 / barrel. 🙂
    (unfortunately I have to explicitly mark the joke).

  11. Dan

    …or they’re twice as worried about terrorist attacks in Nigeria.

    Or twice as worried about the externalities of tailpipe emissions on their lungs, statues, vegetation*, frescoes, buildings**, and other property***.

    Oh, wait: Randal claimed most of those have been eliminated. Never mind.

    DS

    * http://journals.pepublishing.com/content/721qvn724381743h/
    ** http://www.blackwell-synergy.com/doi/abs/10.1111/j.1600-0668.2005.00365.x
    *** http://www.arirabl.com/publications/myPapers/Spadaro+1999LCA-IPA.pdf

  12. sustainibertarian

    AP: Is this satire, or did he write this to prove how stupid he is?

    Karlock: It is truly a shame that so many illiterate fools infest out popular press (and the planning “profession”.)

    A marriage made in ad hominem heaven!

  13. rationalitate

    And don’t forget government investments in highways that fostered suburb creation.

    Too true. And before WWII, when few governments used user fees to cover the costs of road construction, this just drove property taxes ever higher, despite the fact that car ownership was confined to only the wealthy at this point. And yet, everyone who owned their own home or lived in a rented home owned by somebody else was paying for the roads. This got to be a huge problem during the Great Depression, when the largest tax burden to most Americans – the property tax – was going to pay off the debt incurred by building all of those roads.

  14. sustainibertarian

    …or they’re twice as worried about terrorist attacks in Nigeria.

    Or twice as worried about the externalities of tailpipe emissions on their lungs, statues, vegetation*, frescoes, buildings**, and other property***.

    Oh, wait: Randal claimed most of those have been eliminated. Never mind.

    DS

    Insert opposition comment here: That is all caused by planner created congestion, Dan.

  15. D4P

    It is truly a shame that so many illiterate fools infest out popular press

    BTW: For the illiterate among us, perhaps Mr. Karlock can explain what “infest out popular press” means.

  16. Ettinger

    Poor European lungs indeed,

    So Europeans produce ½ the smog, overall. But because their cities are 6 times denser, smog density, that is concentration of smog in the air they inhail is 3 times higher than American suburbia. Not only that, but they have to breathe more of it as they often have few options but to walk on sidewalks next to moving traffic. So, less smog emitted but right into their lungs.

    Ever lived in those European cities to get a feeling for traffic density? Paris, Rome,London? Go jogging in Rome and then cough into a paper towel.

  17. bennett

    “Ask runners who come from Europe to visit the US. Where would they rather jog? a European city or American Suburbia?”

    This is a common pro-suburbia argument against density. There is no doubt that running and walking FOR EXCERSIZE is nice in suburbia. But walking to actually get somewhere is impossible. I don’t really car how fat yuppies want to try and get thinner, I would like to live in a walkable proximity to useable amenities.

  18. Francis King

    Antiplanner wrote:

    “1. RIP for the internal combustion engine

    2. Economic stimulus”

    Indeed. As Access magazine points out, horses used in the urban environment were reaching the end of their natural progression. The streets were filthy, and not just in the USA. One mall in the UK was notorious for the density of horse flies that it attracted. Then, the horse disappeared, and instead of ecnomic collapse, it was replaced by the car. Are we not reaching the same point again?

    Rationalite wrote:

    “In a true market for homes, rent would always be cheaper than a mortgage, and the remaining money could be invested. ”

    Given that the rented home is provided by the landlord taking out a mortgage, I would have thought it would be the other way around – rented properties, in a true market, would cost more per month, but would isolate the renter from negative equity and would permit them freedom – the kind of freedom that doesn’t happen, when most people own their own homes.

  19. bennett

    “…but would isolate the renter from negative equity and would permit them freedom.”

    I’m not sure about the economic point that F.K makes but this is exactly why I don’t own a home. Maybe I’ll come around one day, but I don’t like being locked down, and unlike Ettinger I don’t have the $$$ or real estate prowess to continually buy, sell and move.

  20. Ettinger

    Buy-regulate-sell buy-regulate-sell…tis the sound of the money choo choo train. No gas needed runs on NIMBY herd energy. You can become a driver too.

  21. Dan

    Ever lived in those European cities to get a feeling for traffic density? Paris, Rome,London? Go jogging in Rome and then cough into a paper towel.

    I did. I lived just south of Würzburg and wherever one went, you could always tell the fat Americans from the locals* – and many of the Americans couldn’t walk far.

    But city life isn’t for everyone. There is a fraction of the American population that doesn’t mind the isolation and having to get in a car to go everywhere except to the bathroom; that population fraction will change at $8/gal gasoline, but many will stay regardless. Good for them, they can have it, just as others want more options than cookie-cutter SFD and press for more housing choices.

    DS

    * who didn’t need to jog, as they were fit enough from walking during the day, Volksmarching on the weekend, etc.

  22. foxmarks

    “I’m going to semiretire in a few years and have a consultancy that will help people learn to grow food in their yards”

    And accept payment in the form of carrots?

    “ust what is so virtuous about a transportation system that doesn’t go where you need to go and takes twice as long to get to where it does go?

    Is this an inherent quality of mass transit…?”

    Yes. By definition and, communal transport meets only the most common needs. One might lower their aspirations, but it would be like telecom reverting to the party-line phone at the general store.

    “despite the fact that car ownership was confined to only the wealthy at this point”

    So, it was the wealthy who bought those 15 millions of Model Ts and 4 millions of Model As? Who knew the USA had such a high proportion of rich people…?

    “you could always tell the fat Americans”

    Slobbering Dan, tell us how you identified the fit Americans.

  23. rationalitate

    By definition and, communal transport meets only the most common needs. One might lower their aspirations, but it would be like telecom reverting to the party-line phone at the general store.

    The costs of telecommunications are so dramatically low that it costs very little to go from party line to direct conversations. Not so with transportation. Though don’t take my discussion of your ridiculous analogy to mean that I actually agree that the two things are in any way analogous.

    So, it was the wealthy who bought those 15 millions of Model Ts and 4 millions of Model As? Who knew the USA had such a high proportion of rich people…?

    The wealthier. Everyone was paying, they were the only ones using. It doesn’t have to be 1% of the population leaching off of 99% for it to be a problem. Furthermore, those millions of cars weren’t all sold before the government was building more roads – they were being sold while the government was building all those roads.

  24. Kevyn Miller

    rationalitate, The model T was the world’s first SUV, built to be driven off-road since that was the reality of early motoring that Henry Ford recognised better than any other car builder of the time. He was targetting farmers, doctors and travelling tradesmen first and foremost. These people needed cars because time is money. Farming and rural trades were seasonal activities so it wasn’t a problem if roads were impassable in winter as long as they were passable during the sowing and harvesting months.

    The fact that early roads were funded from property taxes rather than sales or income taxes meant that farmers initially paid for costs they imposed on rural roads, often through increased land values flowing from the increased productivity made possible by cars and trucks. In urban areas it tended to be the wealthy car owners who owned the most expensive homes and paid the highest property taxes. But you are probably right that this was still an inequitable ditribution of costs.

    The main reason for introducing gasoline taxes was to relieve the burden on property owners living alongside roads that carried high volumes of through traffic. Some jurisdictions have extended that, usually in a rather ad hoc manner, to other classes of roads as auto use became more ubiquitous. Unfortunately my country stopped this process 50 years ago so we are stuck with the busiest 10% of road miles fully funded from user fees and the remainder funded 50/50 from road users and property owners.

  25. Kevyn Miller

    “Go jogging in Rome and then cough into a paper towel.” Ah yes, Rome’s new urbanist planners – didn’t they see the motorcar coming? But the current generation aren’t much better. All those rickety old buildings. Nobody would notice if you knocked ’em over to make room for some freeways. Somebody should tell them ya aint civilized till ya adopt “out with the old, in with the new” as your guiding principal for urban planning. That decrepit old sports stadium in the city centre must make the Roman’s the laughing stock of the world. Should’ve been bulldozed decades ago to make room for a mall or a carpark or a freeway interchange or something
    else equally useful and modern 😉

    But, seriously, the problem isn’t solely population density. Italy’s astronomical gas prices and Rome’s narrow streets haven’t persuaded people to walk instead of driving. They’ve turned to Vespa’s and diesel cars, all exemp from the air pollution regs that apply to petrol cars. Then there is the problem of catalytic converters in dense cities. Cats don’t do anything till they exhaust had heated them to their operating temp, which takes several km. If the average Roman car isn’t travelling far or fast enough to generate that critical temp then their tiny cars actually pump out more toxins than big American cars travelling suburban commute distances.

    Are planners too busy planning to have time for analysis? Or is it the old story of not letting facts get in the way of a good plan 🙂

  26. rationalitate

    Unfortunately my country stopped this process 50 years ago so we are stuck with the busiest 10% of road miles fully funded from user fees and the remainder funded 50/50 from road users and property owners.

    Same as in the US. The interstates and large roads are funded almost entirely through user fees, but local roads are funded similarly to how it’s done in New Zealand. However, given that the roads funded by user fees are so much more expensive than the others, the overall share of financing by user fees is quite high. However, these fees only cover the accounting cost of the roads, and not the opportunity cost – that is, many roads lie on very valuable property (especially in cities), and thus would very likely not exist if a profit-seeking entrepreneur owned the land. Furthermore, the only reason that the roads are almost profitable and that the traffic is almost bearable is that land use regulations force low density. Just like mass transit becomes expensive and unwieldy in low density areas, roads become expensive and unwieldy (with regards to construction and the sheer amount of lanes you’d need to build) in high density areas. But if you force low density everywhere, the car can work everywhere. But it’s important to recognize that you are indeed forcing the density, and that the roads might very well be much more expensive and congested if you weren’t constantly forcing people to not develop their property.

  27. prk166

    “I think that people who bought single-family homes in the far-out suburbs and exurbs of the Sun Belt within the last few years would disagree with your frequent assertions that homeownership is an unalloyed good.”–rationalitate

    I agree. I tried finding the link. Sorry I couldn’t find it. On average home buyers don’t make any better a return than bonds. Average means that there will be some who make out much better and others that are losing money.

    I’ve wondered how that equation would change if the mortgage deduction were removed.

  28. rationalitate

    I’ve wondered how that equation would change if the mortgage deduction were removed.

    Not to mention below-market rates that state-supported lenders like Fannie Mae and Freddie Mac offer to anyone who comes into contact with them. But hey, it’s the American dream – who cares if it’s not economically viable and requires constant government intervention to maintain? (Who knew the American dream involved so much socialism??)

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