As you know, I’m not blogging right now — I’m taking a well-deserved vacation. But if I were blogging, I would most likely be lamenting Hillary Clinton’s decision to take up the side of ignorance in the culture war against expertise.
“There are times that a president will take a position that a broad support of quote-unquote experts agree with. And there are times they will take a position that quote-unquote experts do not agree with.”
That would be Howard Wolfson, Clinton’s communication director, speaking about the McCain/Clinton gas tax holiday proposal. The one that is so bad that a gaggle of economists have fired up a blog just to oppose it. But who cares what economists might say?
STEPHANOPOULOS: But can you name an economist who thinks this makes sense?
CLINTON: Well, I’ll tell you what, I’m not going to put my lot in with economists….
Paul Krugman gets this completely wrong. He thinks the gas tax holiday, while obviously a bad idea, is small potatoes in the big scheme of things, and all of the fuss is just an excuse to paint Hillary Clinton as evil. That’s not right. It is small potatoes, policy wise, but the fuss is being kicked up by the Clinton campaign themselves — they’re running a wide variety of ads attacking Obama for opposing the holiday, casting him as elitist and out of touch.
The gas tax holiday doesn’t help “ordinary Americans.” The supply of petroleum during the summer months is essentially fixed, and the oil companies will charge what traffic will bear. If taxes are lower, they will simply charge the same amount and pocket the difference. Clinton’s proposal includes some weird end-around in which the oil companies pay extra windfall profits taxes so that the idea is purportedly revenue-neutral; which means the whole scheme is precisely meaningless, as the same amount of tax is being paid either way.
The tragedy is that Hillary Clinton understands perfectly well that this is a stupid policy. (If you actually wanted to save people $40 over the course of the summer, you would just give them $40.) She is embracing it anyway. Her campaign is pushing it as a purely symbolic gesture, attempting to take the side of “real people” against elitist snobs with all of their “education” and “expertise” and Ivy-League degrees.
A bit later she added: “It’s really odd to me that arguing to give relief to a vast majority of Americans creates this incredible pushback…Elite opinion is always on the side of doing things that don’t benefit” the vast majority of the American people.
It’s hard to be more clear than that — elite opinion is the enemy. She knows perfectly well that this is a lie. But it’s politics as usual. I don’t want to dislike Hillary Clinton — she is smart and capable, and would be an enormously better President than John McCain. But treating experts as the enemy is a craven strategy to achieve short-term gains at the cost of substantial long-term harm. It’s sad to see her go down that road, and I hope she reverses course soon.
After all that you wrote what exactly makes her smart and capable? That she’ll say whatever might get her elected? If its just being a better president than McCain than you aren’t setting the bar very high.
I am not defending Hilary, but would you trust the practitioners of the “dismal science”.
‘I am not defending Hilary, but would you trust the practitioners of the “dismal science”.’
I’d trust them a lot more than a false-populist hack attempting to use smoke and mirrors to hide what are basic economic truths. For example, in a capitalistic society, it is rational for a supplier to set prices as to what the market will bear. Clearly the market is bearing, albeit grudgingly, $4 a gallon. Should the point-of-sale gas tax (paid both by, technically, the corporations and the consumer) vanish, the cost of gasoline will /still/ be $4 a gallon because they can get away with it. Therefore, the desired economic effect (reducing the cost of gasoline for the consumer) does not happen, while the tacitly suggested desired economic penalty for the “price-gouging” corporations also does not happen. In fact, the Big Bad Oil Cartels profit even further.
Hillary Clinton: she’s for Big Oil in a Big Way.
Sean said:
Yeah right, and Obama, on the other hand respects expertise and the opinions of educated people, and does not stoop to pandering. That must be why he makes statements like “as a Christian I will never accept gay marriage,” (never mind that Obama’s church, the United Church of Christ, supports gay marriage).
Also, Sean said:
In all fairness, aren’t you misrepresenting Clinton’s proposal here? Whatever the merits otherwise, her proposal was pretty much exactly to do as you say – in other words, to have the oil companies give people the $40. And your prediction of what would happen is just one point of view, not a mathematically provable result, or are you misunderstanding what economists actually do? And in fairness it does seem hard to justify keeping the oil companies’ current obscenely favorable tax arrangements in this climate.
Also, wherever did you get the notion that economicists’ predictions had much validity? A continued belief in the trustworthiness of economicists’ pronouncements, in the face of overwhelming experimental evidence to the contrary over many years, seems rather disturbingly anti-scientific.
Just for the record, this is not some marginal economic theory at issue, but supply and demand. Pretty hard to argue with that one. The simplest economic theory based on a very straightforward psychological theory of human behavior – high price, less demand, low price more demand. A gas tax holiday will not lower the price of gas, because increased demand with put upward pressure on prices.
This is really a no-brainer. And ethanol? More land in crops, more water used, higher food prices. I guess I care more about the world environment than it bothers me to line the pockets of my “political enemies” or corporations.
The only problem with this theory is that it isn’t (in the scientific sense), and that it doesn’t work.
Of course, the same signatories who are now so intent in belittling Clinton were considerate enough to warn us en masse of the impending housing market collapse, the impending tech collapse, and the impending failure of the Chicago group theories in Russia and South America, all conveniently in time to avoid all these economic disasters, right?
“Well, I’ll tell you what, I’m not going to put my lot in with economists….”
I blame her delivery. Give her the self-confidence you’d get from 5 more points in the WV polls, that line would have killed. I’m certain she got the irony, and I’m equally sure Stephanopoulous and her campaign staff didn’t.
She’ll be out of it soon, probably. If I were her, I’d send her entire campaign staff on a fact-finding mission to the bottom of the Marianas Trench.
“A gas tax holiday will not lower the price of gas, because increased demand with put upward pressure on prices.”
I’m doubtful of this. Demand for gasoline seems to be relatively static; it takes a very significant swing in price to significantly change our consumption patterns.
Contrary to Sean’s assertion, the price of gasoline is not ‘what the market will bear’. The price is almost always just the sum of the world market crude oil price, refining costs, transportation costs, taxes, and then a slender profit margin at the top. Refining and selling gasoline doesn’t make a lot of money, because it is a commodity, and because supply is always adjusted to meet demand. The only time prices get out of whack with underlying production costs is when there is a supply disruption, such as a hurricane knocking out refineries.
Consider: When the price of crude falls, the price of gasoline also falls. The refiners and retailers don’t absorb the difference into their profit margin. Why would falling taxes be different than falling crude prices?
I still think the gas tax holiday is bad policy — and probably bad politics also if it ever actually got implemented — but it doesn’t pass the economic smell test to say the retailers will absorb the tax cut and keep prices the same.
A google search “gas demand and price” resulted in links to numerous studies and meta-analyses that support that gas consumption lowers as prices rise. These patterns are more significant over longer periods, so a short “gas tax holiday” may not change habits much, but some change is likely. It is not the retailers that will absorb the difference, but limits to current supply, partly due to refining. That is what will drive the prices back up.
Sean said:
By the way, if it were true that companies charge what consumers will pay, then prices would not have been lower five or ten years ago. The fact that they were refutes the quoted assertion.
The price of something is the point at which the supply and demand graphs cross (slightly modified by some sociology and psychology). For a fixed supply, each company will charge what they think people will pay. If the profit margin is high, any company may get undercut by a competitor looking to steal their customers – collapsing the equilibrium and triggering a price war, resulting in equilibrium at a lower price point.
Demand is higher now, so the market can bear a higher price.
I don’t approve of Hillary’s dismissive attitude, but nevertheless: IMHO she has a point. I think that most economists instinctively think about the subject in ways that favor the wealthy and not the common good. (Many of them have contempt for Paul Krugman, who clearly cares about “the little people.”) This is an impression I have but not the time or space to analyze in detail here.
BTW, Almighty Bob, PorkBellyFutures, (or anyone), what are your thoughts about getting through the Peak Oil era? Is the situation as dire as simple consideration of likely “demand” (shall we say, desired demand?) continuing to outstrip supply as population and cars increase in India and China? I’d like to think we can deal with this, but our leaders will have to provide real leadership. The BAU model of governance will not get us through.
Neil, I don’t think there is any question that our standard of living here in the US will fall in the future as we run out of oil (and face increased competition for other resources). In some ways that may be good as our society became more and more wasteful as consumer goods from China became so cheap. In other ways it will be hard. I don’t think our government has shown any true leadership on any issue that means sharing bad news with the public. I only hope our resourcefulness and technological savvy can protect us from the worst scenarios. In that sense, I guess I throw in my lot with the scientists over the politicians.
Here is a link to an entertaining article where India takes a shot at fat americans.
http://www.nytimes.com/2008/05/14/business/worldbusiness/14food.html?em&ex=1210996800&en=3b3467c609f22a06&ei=5087
Neil B.
You write
What economists are you talking about? I am an economist, I know many economists and that picture does not look even remotely right (e.g., look at the bio of Duncan Foley, one of the signatories of the anti-gas-tax-holiday website).
Can you provide some evidence, examples? (please consider only real economists, those who write research articles, not those who write only op-ed pieces or talk about the stock market on CNBC)
As to Krugman, it seems he has more or less stopped being an economist (a very well respected one, winner of the prestigious J.B. Clark Medal in 1991) and is now mainly a political commentator – a very pro-Clinton one, and even he thinks the gas-tax-holiday is a bad idea.
Valter, this is likely much of my “problem” with economists:
You wrote: Can you provide some evidence, examples? (please consider only real economists, those who write research articles, not those who write only op-ed pieces or talk about the stock market on CNBC)
Well, the latter and their attraction to Republican-style policies mostly formed my opinions, and I thought what such commenters would put forth would be a reflection of their “professional opinions” – if not, then why the disparity between the perspectives of research articles, and the viewpoints (not the same thing in kind as what comes from research, but should follow it closely) of those who write op-ed pieces? What does, and why, provide the tone to opinion output that gives me that impression? The kind of economists that write opinions aren’t “typical”, or they don’t provide “opinions” in harmony with their research perspectives? For example, the WSJ-style opinion writers like to pick on things like the minimum wage or social security, but note that our economy has done great for decades with those in place. And “socialized” Europe has decent standards of living, and more security (note also that the claim the US has “the best health-care system in the world” has been proven a fraud.) Also, many of the criticisms of liberal/populist policies are fallacious (complaint against “increasing” the MW when in real dollar terms it has gone down, so that would just be a catchup. Even supposed professionals like Walter Williams make fallacious arguments about how only 2% or so get the MW, but of course any given current increase affects everyone earning between the old MW and the new pick. BTW the MW should just be CPI adjusted, so should tax brackets and deductions, capital gains calculations, etc.
We have only pushed the problem (such as it is) into segmentation, not solved or dismissed it. BTW I should read more research work, but fear I wouldn’t really get the point (would an amateur?)
‘Best’ healthcare is debatable; however, if it was ‘most advanced,’ you’d walk away with the brass ring.
In regard to your earlier question (well, I’m going to take the foolishly-offered platforrm to expand on it, but I should produce an answer):
the thing that worries me most about Peak Oil is not the loss of the most easily transported, calorific fuel we ever thought of we have other fuels, if less calorific and/or transportable (hell, we burn natural gas at the well); there are mitigation strategies, even if they’re not particularly well implemented right now.
My big worry is the loss of our source of large amounts of easily-manipulated hydrocarbons. So much of our current manufacturing is massively dependent on plastics. So little of our plastics are not made from oil.
So, yeah; Peak Oil may mean serious agricultural damage (fertilizer price is heading for the roof, just for a start) and all sorts of other fun, but ultimately, in pure energy terms it’s survivable. The famously car-ridden LA may revert to the original city plan for all those roads, and buy buses. The US might drop its tariff on Brazilian ethanol (which is not nearly such a bad idea as grain ethanol). We might start using sail power again (land yachts are fun), or grow vegetables in windowboxes. High-rise apartments could be mandated, to save on heating costs (building underground would probably be even more effective, with the side benefit of the suburbs and “local farming,” or some other land use – even if just as really good scenery – being able to overlap to some degree). But loss of plastics as a material would not be pretty.
Economics is part hard science part social science. If we try to pare it down only to its hard science aspects what do we have – we are left with interpreting charts and statistics over short and long periods and a few well worn basic principals (such as the lovely bottom-up aspect of capitalism). Politics is so top-down, I think it runs afoul of most good economic theories fairly quickly. Why do I consider economics as a description of processes that are bottom-up? Is that assumption correct? I do think economies are basically systems that developed and operate (best) from the bottom-up (with a little top-down intervention necessary for the public good, such as environmental laws). Top down monetary policy has had horrible effects on the dollar, which has led to high gas prices…but I digress.
Skepticism is key, as with anything. In his book -The Black Swan, Taleb gives examples of economists who can’t make the transition between real life and theoretical ideas. They make simple mistakes of bias and probability that you wouldn’t expect from them. So, just because someone does great theoretical work doesn’t mean you wont see them on TV saying something ridiculous.
Neil,
Well, if those who “talk about the stock market on CNBC” formed your opinion of economists, then we have pretty much identified the source of the error 🙂
You ask if there is a substantial difference of viewpoints between the CNBC-WSJ types and mainstream economic profession and what is that difference. The first question is easy: the answer is “yes, there is”. The second is more complex and I do not have a full answer, but here are my 2c’s worth (quite in line with what Sandy’s wrote, I think).
First, economics has pretty few hard-and-fast general results and for any big, sound-bite-worth problem, you are likely to find economists who honestly disagree and economists who take one position because of some ideological and cognitive biases: guess who’s going to be invited to talk in very business-friendly media?
Second, economists on public media often seem unable to say “I don’t know” even when it is clear that there is no overwhelming consensus in the profession or simply when the question is not one they have personally researched very extensively (this is a problem with experts in other disciplines, too; but economics is such a broad field that the problem is amplified). In these cases, the economist’s ideological preferences tend to supply the answers – and the question in the previous paragraph applies again.
Now, having said all this, it is true that economists tend to have a generalized prior belief in the effectiveness of market solution that is larger than that in the average population. That is probably not an example of bias, but an example of better professional judgment. And it has nothing to do with a preferential concern for the rich vs. the poor: it has to do with beliefs about the most efficient means of reaching some ends (including the end of redistributing wealth from reach to poor, if that is what the polity wants).
Moreover, such market-biased prior does not necessarily survives the economic analysis: the professional consensus is that many areas of social life would be better off with some enlightened form of government intervention than with libertarian laissez-faire (for example, there are not many people asking to repeal the antitrust laws!). Even on subjects like MW or school vouchers, there is quite a lot of work being done that goes beyond the (broadly correct) first-order approximation that MW does have a (possibly small) negative effect on employment and vouchers put pressure on underperforming schools.
Finally, you ask whether research work in economics would be understandable by an amateur. Well, an amateur is unlikely to enjoy Econometrica, but then there is not much of immediate policy relevance there anyway. If you want to sample mainstream economics, try browsing the Journal of Economic Perspectives and maybe the Journal of Economic Literature. And, for an example of serious-but-easy-to-read applied policy work by a top-notch theorist, do have a look at Peter Diamond’s “Social Security Reform” (Oxford University Press).
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