Adam Ozimek argues that we shouldn't jump to conclusions about the ineffectiveness of a gas tax, saying that the elasticities I blogged about yesterday were from IMF estimates that are substantially lower than other estimates. You should read the whole thing, but I think there are two points worth highlighting.
The first is that elasticities of demand for oil seem to be falling; they were much higher in the seventies than they are now, especially here. This makes perfect sense: when prices spike, people invest in making their lives more efficient, and when prices fall, they don't suddenly rip out the insulation and sell the Prius. (Though anecdotally, when I bought my Mini in mid-2008, oil prices were very high, and so were prices for small cars--dealers couldn't keep small cars on the lots. A year later, oil prices had fallen, and I'm told the market for small cars had evaporated--those who were buying, were buying big, and dealers couldn't move little cars even at a loss).
When you're very inefficient, small changes in efficiency mean big reductions in fuel usage--and spending. But as your products become more efficient, the potential gains get smaller and smaller:
This graph is really important, and I think underappreciated by those who write about things like CAFE standards. What it tells you is that for both consumers, and consumption, the difference between 10 mpg and 20 mpg is larger than the difference between 20 mpg and 40 mpg.
And what about changing driving habits? The effect persists. All else equal, you can think of increasing fuel efficiency from 10 to 20 mpg as cutting someone's driving in half. Just as with MPG, the effect is largest if they're already very efficient. I use about 12 tanks of gas a year in my Mini-Cooper. Cutting my fuel usage in half--either by reducing my driving, or increasing my fuel efficiency--just won't save much energy, or money.
So it makes sense that in 1973, when prices spiked, people reacted by buying smaller, more efficient cars. It also makes sense that nowadays, people are slower to switch; unless gas runs up to $10 a gallon or above, we're already getting past the point where increasing fuel efficiency delivers giant annual cost savings for a typical family driving 8-10,000 miles a year per car.
But not all is lost for supporters of a gas tax. Ozimek also points out that price elasticity of demand may not be the same as tax elasticity of demand:
As Killian and Davis point out, another serious problem with these estimates is that they estimate the price elasticity of demand, and not the tax elasticity of demand. They argue:
"...the response of gasoline consumption to a change in tax is likely to differ from its response to an average change in price. Price changes induced by tax changes are more persistent than other price changes and thus may induce larger behavioral changes. In addition, gasoline tax increases are often accompanied by media coverage that may have an effect of its own."
To overcome these issues, they look at U.S. state level demand for gasoline. Their results shed some interesting light on how the econometric mispecifications affect elasticity estimates. Using a single equation model they estimate an elasticity of -0.10. Using a panel data method, as done in the IMF study, the elasticity increases to -0.19. And finally using changes in state level gas taxes as an instrument they find an elasticity of -0.46, which more than four times larger than the single equation model.
So a gas tax might well be effective after all. Whether it is politically possible is, of course, an entirely different question.
“A typical person is more than five times as likely to die in an extinction event as in a car crash,” says a new report.
Nuclear war. Climate change. Pandemics that kill tens of millions.
These are the most viable threats to globally organized civilization. They’re the stuff of nightmares and blockbusters—but unlike sea monsters or zombie viruses, they’re real, part of the calculus that political leaders consider everyday. And according to a new report from the U.K.-based Global Challenges Foundation, they’re much more likely than we might think.
In its annual report on “global catastrophic risk,” the nonprofit debuted a startling statistic: Across the span of their lives, the average American is more than five times likelier to die during a human-extinction event than in a car crash.
Partly that’s because the average person will probably not die in an automobile accident. Every year, one in 9,395 people die in a crash; that translates to about a 0.01 percent chance per year. But that chance compounds over the course of a lifetime. At life-long scales, one in 120 Americans die in an accident.
It’s a paradox: Shouldn’t the most accomplished be well equipped to make choices that maximize life satisfaction?
There are three things, once one’s basic needs are satisfied, that academic literature points to as the ingredients for happiness: having meaningful social relationships, being good at whatever it is one spends one’s days doing, and having the freedom to make life decisions independently.
But research into happiness has also yielded something a little less obvious: Being better educated, richer, or more accomplished doesn’t do much to predict whether someone will be happy. In fact, it might mean someone is less likely to be satisfied with life.
That second finding is the puzzle that Raj Raghunathan, a professor of marketing at The University of Texas at Austin’s McCombs School of Business, tries to make sense of in his recent book, If You’re So Smart, Why Aren’t You Happy?Raghunathan’s writing does fall under the category of self-help (with all of the pep talks and progress worksheets that that entails), but his commitment to scientific research serves as ballast for the genre’s more glib tendencies.
That's not a harsh assessment. It's just a fair description.
Millennial politics is simple, really. Young people support big government, unless it costs any more money. They're for smaller government, unless budget cuts scratch a program they've heard of. They'd like Washington to fix everything, just so long as it doesn't run anything.
That's all from a new Reason Foundation poll surveying 2,000 young adults between the ages of 18 and 29. Millennials' political views are, at best, in a stage of constant metamorphosis and, at worst, "totally incoherent," as Dylan Matthews puts it.
It's not just the Reason Foundation. In March, Pew came out with a similar survey of Millennial attitudes that offered another smorgasbord of paradoxes:
Millennials hate the political parties more than everyone else, but they have the highest opinion of Congress.
Young people are the most likely to be single parents and the least likely to approve of single parenthood.
Young people voted overwhelmingly for Obama when he promised universal health care, but they oppose his universal health care law as much as the rest of the country ... even though they still pledge high support for universal health care. (Like other groups, but more so: They seem allergic to the term Obamacare.)
A professor of cognitive science argues that the world is nothing like the one we experience through our senses.
As we go about our daily lives, we tend to assume that our perceptions—sights, sounds, textures, tastes—are an accurate portrayal of the real world. Sure, when we stop and think about it—or when we find ourselves fooled by a perceptual illusion—we realize with a jolt that what we perceive is never the world directly, but rather our brain’s best guess at what that world is like, a kind of internal simulation of an external reality. Still, we bank on the fact that our simulation is a reasonably decent one. If it wasn’t, wouldn’t evolution have weeded us out by now? The true reality might be forever beyond our reach, but surely our senses give us at least an inkling of what it’s really like.
Nearly half of Americans would have trouble finding $400 to pay for an emergency. I’m one of them.
Since 2013,the Federal Reserve Board has conducted a survey to “monitor the financial and economic status of American consumers.” Most of the data in the latest survey, frankly, are less than earth-shattering: 49 percent of part-time workers would prefer to work more hours at their current wage; 29 percent of Americans expect to earn a higher income in the coming year; 43 percent of homeowners who have owned their home for at least a year believe its value has increased. But the answer to one question was astonishing. The Fed asked respondents how they would pay for a $400 emergency. The answer: 47 percent of respondents said that either they would cover the expense by borrowing or selling something, or they would not be able to come up with the $400 at all. Four hundred dollars! Who knew?
A scathing obituary of Richard Nixon, originally published in Rolling Stone on June 16, 1994
MEMO FROM THE NATIONAL AFFAIRS DESK
DATE: MAY 1, 1994
FROM: DR. HUNTER S. THOMPSON
SUBJECT: THE DEATH OF RICHARD NIXON: NOTES ON THE PASSING OF AN AMERICAN MONSTER.... HE WAS A LIAR AND A QUITTER, AND HE SHOULD HAVE BEEN BURIED AT SEA.... BUT HE WAS, AFTER ALL, THE PRESIDENT.
"And he cried mightily with a strong voice, saying, Babylon the great is fallen, is fallen, and is become the habitation of devils, and the hold of every foul spirit and a cage of every unclean and hateful bird."
Richard Nixon is gone now, and I am poorer for it. He was the real thing -- a political monster straight out of Grendel and a very dangerous enemy. He could shake your hand and stab you in the back at the same time. He lied to his friends and betrayed the trust of his family. Not even Gerald Ford, the unhappy ex-president who pardoned Nixon and kept him out of prison, was immune to the evil fallout. Ford, who believes strongly in Heaven and Hell, has told more than one of his celebrity golf partners that "I know I will go to hell, because I pardoned Richard Nixon."
The U.S. president talks through his hardest decisions about America’s role in the world.
Friday, August 30, 2013, the day the feckless Barack Obama brought to a premature end America’s reign as the world’s sole indispensable superpower—or, alternatively, the day the sagacious Barack Obama peered into the Middle Eastern abyss and stepped back from the consuming void—began with a thundering speech given on Obama’s behalf by his secretary of state, John Kerry, in Washington, D.C. The subject of Kerry’s uncharacteristically Churchillian remarks, delivered in the Treaty Room at the State Department, was the gassing of civilians by the president of Syria, Bashar al-Assad.
There’s a common perception that women siphon off the wealth of their exes and go on to live in comfort. It’s wrong.
A 38-year-old woman living in Everett, Washington recently told me that nine years ago, she had a well-paying job, immaculate credit, substantial savings, and a happy marriage. When her first daughter was born, she and her husband decided that she would quit her job in publishing to stay home with the baby. She loved being a mother and homemaker, and when another daughter came, she gave up the idea of going back to work.
Seven years later, her husband told her to leave their house, and filed for a divorce she couldn’t afford. “He said he was tired of my medical issues, and unwilling to work on things,” she said, citing her severe rheumatoid arthritis and OCD, both of which she manages with medication. “He kicked me out of my own house, with no job and no home, and then my only recourse was to lawyer up. I’m paying them on credit.” (Some of the men and women quoted in this article have been kept anonymous because they were discussing sensitive financial matters, some of them involving ongoing legal disputes.)