Regulatory Policy

The High Cost of Cheap Gas

Our Weekly Economic News Roundup and recgarge or refill?
Comments (3)
  1. Rick Shapiro says:

    The politics of gas prices illustrates the fact that (like the definition of a liquid) the meaning of price elasticity needs to account for differing simultaneous relaxation times. The sunk cost of a car or of a home purchase means that allowing gasoline price to do its job as an equilibriating signal can cause enormous hardship. Governments need to figure out how to alleviate that hardship, while preserving the signal for gradual approach to market equilibrium without subsidy.

    1. Elaine Schwartz says:

      Can we add an environmental ingredient to your comment?

  2. Rick Shapiro says:

    Of course. To mitigate the approaching climate catastrophe, we need to tax carbon extraction at its source, as well as to eliminate subsidies for gasoline usage (and the subsidies implied by not requiring performance bonds for externality risks assumed by limited liability mining companies). But my point was that the structure of where and how people live and work will cause them great hardship unless society finds a way to compensate them for the disruption.

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