Yesterday, I posted this. Last night I got this:
Hi Tim,
I read with interest this item on the Environmental Economics website…Would like to get your thoughts on what would constitute “smart” gas price coverage…
We struggle with how best to cover gas prices each and every time prices spike!
Regards, Greg Agvent, Director of Planning, CNN
My thoughts on what would constitute 'smart' gas price coverage?
- Interview me (I didn't send this).
- (I sent this) In short, the issue of gas price coverage comes down to one about the
'need to do something' about gas prices. In many cases, gas price
fluctuations are the result of natural market forces (it might be
changes in world supply, or changes in demand). Because gas consumption
is viewed as a necessity by many, the immediate reaction to rising
prices tends to be "do something." But prices, when adjusting due to
market forces, create signals for consumers to make better decisions.
For example, if gas prices are kept artificially low, consumption will
be kept artificially high. The problem with doing something about high
gas prices is that doing something interferes with the signals that
markets are sending.
To get more to your question of what constitutes 'smart' coverage, smart coverage will recognize the differing roles of market forces and policy forces. Policies to remedy uncomfortable, but natural, market conditions represent bad economics. Policies to remedy market misallocations are good economics. Politicians 'doing something' to make people complain less, well...