Jimmy Carter and oil prices
From Rethinking Carter by William L. Anderson [Posted October 25, 2000] Posted at http://www.mises.org/fullarticle.asp?control=535id=68 by the Von Mises Institute First, he announced gradual decontrol of oil prices and the phasing out of the Keystone-Cops like government allocation system. However, Carter also pushed a Windfall Profits Tax on the belief that decontrol would bring higher prices and, thus, higher profits to oil companies that really don't deserve them. The Wall Street Journal so opposed Carter's oil tax that it published an editorial, Death of Reason, on the day Congress passed the tax, bordering the editorial in black. Full decontrol was scheduled to take place in the spring of 1981, but Reagan upon taking office lifted controls almost immediately, thus receiving credit for what was mostly the action of his predecessor. While Carter was mistaken in his belief that decontrol would automatically increase oil profits (many investors also made the same error), one must also recognize the political heat he took for his actions, especially from the left. Ralph Nader, who had endorsed Carter as a breath of fresh air just four years earlier, denounced oil decontrol as the greatest anti-consumer action of this century and predicted $600 a barrel oil by 1990.
Gas Prices
The Wall Street Journal had a good article and leters about gas prices this week. Cyril Morong April 6, 2004 Commentary (U.S.) Gas Panic By JERRY TAYLOR and PETER VAN DOREN The hysteria is building. Newspapers and television news broadcasts scream that gasoline prices today are higher than at any other time in recorded history. But so far most Americans aren't buying into the hype -- and they shouldn't. While the Sturm und Drang raged over gasoline prices, Gallup released a poll revealing that Americans don't really care all that much about this alleged "terror at the pump." Only 29% of those surveyed believed that the energy situation in America is "very serious" (compared to the 58% who thought so during 2001) and only 35% worry a great deal about energy supply and prices. Moreover, if forced to choose between environmental protection and energy production, a scant plurality of Americans will still choose the former over the latter (48% to 44%). Is this evidence that Americans are too complacent and self-absorbed to fully understand what's going on in the world around them? No -- it's evidence that both the media and the public-policy elite are long overdue for a refresher course in Econ 101. In short, gasoline prices are relatively normal by historic terms. Sure, people are paying more for gasoline today than ever before. They're also paying more for houses, cars, lettuce, baseball cards and almost everything else than ever before. Historical comparisons of prices over the years mean absolutely nothing unless we adjust for inflation. If we adjust gasoline prices for inflation and use 2003 dollars, we find that during the most celebrated days of cheap fuel and gas guzzling cars -- 1955 -- gasoline actually cost $1.66 a gallon on average across the nation. In 1972, the year before OPEC began to flex its muscles, prices were $1.28 a gallon. In 1981, the real record was set -- $2.36 cents a gallon. Heck, prices are only a nickel higher now than at this time last year. We should not stop there, however. A better measure of the affordability of gasoline over time is not its inflation-adjusted price alone, but its inflation-adjusted price in comparison with our economic resources (in this case, inflation-adjusted GDP per capita). Even though the real price of gasoline was lower in 1972 ($1.28) than today ($1.73), per capita GDP is now $39,919 whereas it was only $20,667 (measured in 2003 dollars) in 1972. Real incomes have almost doubled since 1972, but real gasoline price have risen only 35%. Real gasoline prices were slightly lower in 1955 than today ($1.66 versus $1.73). But real per-capita GDP is almost $40,000 today and was only $14,094 in 1955. Real gasoline prices at the height of the oil shock in 1981 were higher than today ($2.36 versus $1.73), while real GDP per capita was lower ($24,369 versus almost $40,000) than today. By those measures, then, gasoline prices today are only 37% of what they were in 1955, 70% of what they were in 1972, and 45% of what they were relative to income in 1981. The idea that politicians haven't the faintest idea what they're talking about when it comes to economics should not surprise us by now. The idea that our nation's top journalists, however, can be so incompetent when it comes to reporting such simple stories as this should give pause. If they bothered to do the math, they'd know there's no reason for panic at the pump. But that's not a very sexy story now is it? Mr. Van Doren is editor of Regulation, a Cato Institute magazine. Mr. Taylor is Cato's director of natural resource studies.
Gas Prices
I forgot a couple of the letters April 8, 2004 Letters No Need to Sing Those Gas-Guzzlin' Blues The excellent April 6 editorial-page piece "Gas Panic" by Jerry Taylor and Peter Van Doren pointed out that real gasoline prices are not as high as the hysterics would have us believe. But it neglected to consider taxes, which further strengthens their conclusions that in real terms gasoline prices are significantly lower than in 1981 and only slightly higher than in 1955. Using 2003 and subtracting the current average federal and state excise taxes of $0.43/gallon, the after-tax price of gasoline is now averaging about $1.30/gallon. In 1981 (when gasoline taxes averaged $0.13/gallon), the real after-tax price was $2.11/gallon, $0.81/gallon more than today. For 1955 these calculations show a real after-tax price of $1.22/gallon. In other words, correcting for inflation and without federal and state excise taxes, gasoline prices would be only slightly higher than in 1955 and considerably lower than in 1981. Salvatore Lazzari-Economist-Germantown, Md. Messrs. Taylor and Van Doren evaluate the real price of gasoline in a historical context, concluding that current gas prices are at normal historic levels. However, their analysis should not stop there. Since fuel efficiency of autos has increased by more than 35% in the past 23 years, the real cost to drive a mile has declined precipitously. The authors cite the real price of gasoline in 1981 as $2.36 per gallon compared with today's price of $1.73, neglecting to put into context that today's cars get more than 22 miles to the gallon vs. a mere 16 back in 1981. Combining fuel efficiency with fuel prices, the real cost to power today's car one mile has greatly improved, decreasing from 15 cents per mile in 1981 to eight cents today. No wonder Americans are driving more. James S. Tisch-CEO-Loews Corp.-New York
nominal wages in the Great Depression
What happened to nominal wages in the Great Depression, especially 1929-33? Did they change much for people who were not laid off? Does anyone know of a good website that shows data for nominal wages in the Great Depression? Is there one that does so for those still employed? Cyril Morong
Inflation adjusted imports and exports.
Anyone know the answer to this? I emailed Bradley Schiller on this and his response is below. Cyril Morong Dr. Schiller:In your book "The Economy Today" (9E), you have statistical tables on theinside covers. For the 1960s, you show the United States with more exportsjust about every year than imports. But on the opposite page, where thefigures are adjusted for inflation, you show trade deficits. How is thispossible? If you adjust both imports and exports for inflation, would theynot each change in the same proportion, leaving trade surpluses? Thank you for your note. At first, I thought you might have uncovered atypo. However, I went back and checked The Economic Report of the Presidentfor 2004. Sure enough, it has positive net exports in nominal terms andnegative net exports in real terms. Actually, the ERP doesn't fill in theNet Exports column for those years; it only gives the gross flows. I didthe subtraction myself (correctly!). My suspicion is that a different priceindex is used for imports, skewing the numbers.
CPI
The Wall Street Journal reported: Greenspan "...repeated his lonstanding view that Social Security benefits should be pegged to a price index that measures inflation differently from the consumer price index now used. He prefers the "chained" consumer price index, which better reflects how consumers spend less on items that become costlier." I thought the official CPI already used a chain-weighted measure? Wasn't there some commission several years ago with Boskin that did this? Cyril Morong
Too many choices
This week's edition of Parade Magazine has an article byBarry Schwartz, author of the book "The Paradox of Choice: Why More is Less." He is a professor of psychology at Swarthmore. He says that as the number of choices we have grows (for products) we become less happy, that it is too hard to know which toothpaste, for example, to buy. All of this affluence and choices has made us less happy. This comes from a survey. The number of people describing themselves as very happy has declined 5% in the last 30 years. We are also more depressed than we used to be. Although no one factor explains this, he writes "It seems that as we become freer to pursue and do whatever we want, we get less and less happy." What do list members think of this? It seems that stores that limited the number of kinds of toothpaste they sell might make higher profits. Are stores aware of this problem and does it affect what they do? Do they hire psychologists to help them sort this kind of thing out? Do people like Schwartz recommend government regulations limiting how many different brands a store can offer? Do economists put much stock in opinion polls? If people keep going to stores that offer them so many choices, that could be revealed preference, so they must think they are happier going to those stores? Do economists have some other explanations for why people are not as happy as they used to be? If people are too affluent, could they give some of their money away and become happier? Cyril Morong
FDR's Folly
Has anyone read the book FDR's Folly by Jim Powell? Cyril Morong
Senior discounts cut at amusement parks
From the article, it seems that this chain feels that there is some change in demand curve for senior citizens. But not all parks are getting rid of their discounts. Amusement Park Chain Ends Senior Discounts By PATRICK WALTERS PHILADELPHIA (AP) - Roller coasters that go upside down don't faze 66-year-old Olga Schmitt. What makes her scream is having to pay more for season passes to Dorney Park and Wildwater Kingdom now that the owners are eliminating senior discounts at their parks nationwide, bucking an industry trend of increased marketing toward seniors. Schmitt and her husband have had season passes to the park near Allentown for years. She loved the rides, especially the roller coasters, and they both enjoy cooling off at the water park in the summer. But the couple is on a fixed income and will likely not go when the price increases next season. (This story continues below the company news) ``That would be the same as taking away your bread at our age,'' said John Schmitt, 72, adding that the couple's two season passes would cost almost twice as much next year. Sandusky, Ohio-based Cedar Fair LP said the change will affect all its parks - Cedar Point, in Sandusky; Knotts Berry Farm in Buena Park, Calif.; Valleyfair, near Minneapolis, Minn.; Worlds of Fun, in Kansas City, Mo.; and Michigan's Adventure near Muskegon, Mich. Cedar Fair officials said they eliminated the discounts because seniors were becoming more active and no longer needed an incentive to visit their attractions. ``In the past the policy was because we felt there was less at the park for them to do,'' said Brian Witherow, director of investor relations for Cedar Fair. ``We see more of them doing more than they were doing before.'' The decision was made in the last month, Witherow said. He also said that Cedar Fair has done more than $90 million in improvements since it bought Dorney Park in 1992, including the addition of more slow-paced rides and areas for seniors. He said 50-and-over customers represent about 2 percent to 3 percent of park attendees. The cut in senior discounts means people over 4 feet tall will have to pay $98 for season passes after the Dorney Park season opens next year, although that rate would be somewhat lower if tickets are bought in advance, spokesman Chris Ozimek said. Other major amusement park chains, however, said they expect to maintain their senior discounts and in some cases increase them. Beth Robertson, a spokeswoman for the International Association of Amusement Parks and Attractions, which represents about 450 parks in the United States, said 4 percent to 5 percent of park attendees nationwide are seniors and that most parks have discounts for them. The number of seniors going to parks increases every year, especially in Florida and on the West Coast, Robertson said. Gerard Hoeppner, a spokesman for Busch Gardens Tampa Bay in Florida, said his park is working to intensify marketing toward seniors. The park has discounts for AARP members, as well as certain discounts for anyone who is 50 or older. ``The active older adult of today is not the senior of 1950 and frankly not even 1960,'' Hoeppner said. ``It's everyone from Mick Jagger to Bill Clinton. That's the new face of aging in America.'' Oklahoma City-based Six Flags Inc., which owns and operates 39 amusement parks in North America and Europe, also has no plans to halt discounts for senior citizens, spokeswoman Debbie Nauser said. Cedar Fair's policy is an aberration as opposed to the rule in an amusement park industry that is increasingly catering to seniors, especially as baby boomers grow older, according to Laura Rossman, vice president of lifestage products and integrated marketing for AARP Services. And since seniors such as the Scmitts are becoming a more active and mobile crowd, Rossman said, parks that don't have discounts may feel a difference at the turnstiles. ``I would assume it's going to have some impact,'' she said. 10/03/03 09:54 © Copyright The Associated Press. All rights reserved. The information contained In this news report may not be published, broadcast or otherwise distributed without the prior written authority of The Associated Press.
