Thursday, June 12, 2008

Chuck Norris: Black Belt, Movie Star, and Energy Economist.

Chuck Norris is stepping into the ring to fight high gas prices. He penned an article with a 12 point plan for congress, which boils down to the title “Congress, Get Off Your Gas, and Drill”. Chuck Norris’s plan follows a simple economic principle if you increase supply the price will go down. Of his suggestions most go toward as the title suggested increased drilling in areas were drilling is currently not allowed and building oil refineries.
So would the average economist think this is a good plan? I don’t think so given the strong reaction against cutting the gas tax. When Hilary Clinton and John McCain proposed a gas tax cut, no one could find an economist for it. Economists tend to believe that the externalities of using oil are such that price of oil should be about where it is and taxes shouldn’t be lowered. That is the more oil we use the more pollution and traffic created so cheap oil might not be best.

Economists also note that in the short run prices will rise as people can’t change their gas usage that much. But after a while people move closer to their jobs and buy more fuel efficient cars, so demand for gas starts to decrease. This will bring back down the price of gasoline.

I have not researched Chuck Norris’s proposal individually, so there may be some places increasing supply makes sense, but I think focusing on demand is going to be the key way to solve the gas price problem in the long run.

One final note. Chuck Norris fact, Chuck Norris can eat a free lunch.

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Dan said...

Bryan Caplan supported the gas tax cut on the grounds that 1) it was less harmful than whatever other hairbrained ideas were floating around, and 2) as a basic principle of tax incidence on a good with an at least somewhat elastic short-term demand function, it would in fact be a giveaway to oil companies, which would have a better effect on exploration and alternative energy research than a windfall profits tax.

Of course, he was just being contrarian, so I guess you could say half an economist supported it.

Ethan said...

My favorite part of that Chuck Norris editorial was "Bill Clinton once said, "We just have to slow down our economy and cut back our greenhouse gas emissions 'cause we have to save the planet for our grandchildren." That is the type of mentality that got us in this trouble. We're saving the planet but killing our economy and nation." A slightly different version I saw a few days back was a little bit more forceful, stating that Chuck was all for saving the planet, but not at the expense of our economic well being (or something, I can't find that). Because killing the planet will surely preserve the economic health of the nation! ...right.

I heard Dick Armey (who was the house majority leader for awhile, and PhD economist) defend drilling in the ANWR awhile back, so that's one economist who thinks oil prices are too high. Of course, he was stumping for McCain at the time, so there's that.

SBVOR said...

If you care to, click the link and spread the word.

Seth Gitter said...

Dan: I saw Bryan Caplan make that arguement. The political feasibility of high gas prices is something economists have not handled well. If gas prices stay this high for a few years, I think people will diminish their complaining, but it seems like most Americans estimate inflation and economic well being of the country by prices at the pump. Not a bad heuristics, but it could be better.

Ethan: True there is some tradeoff of killing the planet and economic growth. There are a few development economist who say we overvalue future life given both discount rates and projected economic growth suggests people in developing countries in 100 years will have incomes similar to develop countries now.