Monday, April 21, 2008

It's Not Just the Candidates

V Postrel - one of my favs - writes about the stupid hypocrisy (Emphasize: stupid) of candidates complaining about high gas prices out of one side of their mouth and calling for reducing CO2 emissions out of the other side.

The math is real simple: to reduce gas consumption and emissions, you need to raise price to discourage consumers from "spending" CO2. Whether the price increase comes from extra taxes, carbon credits, or market factors, the result will be lowered consumption.

*Note: historically gas has been considered an inelastic good, ie a good where the price doesn't not effect demand. I imagine this is one of the reasons we have global warming. But I can tell you from a consumer perspective, the rapid increase in gas prices effects MY gas consumption - or at least makes me a little bit more aware of it. Furthermore, if gas prices tripled from their current price, it would completely change my consumption habit, so the notion of inelasticity must be tempered against the degree...

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