Economists frequently complain that even when 98% of the profession agrees on something (say a free-trade proposition), the media will go to lengths to dig up an economist from the 2% minority in order to balance one from the 98% majority, in their feverish and misguided attempt to appear unbiased and balanced on every issue, even issues that don’t really have two sides. The New York Times op-ed page has outdone itself today by publishing “The 18-cent Solution” by Bryan Caplan. The “callout” heading is “Found: an economist who backs the summer gas-tax holiday.” The impetus, of course, was the question posed to Hillary Clinton by a reporter: can you name a single economist who supports the idea of a summer suspension of the federal gasoline tax? Newshour gave up on trying to find one.
In this case, the NYT evidently couldn’t find an economist who really takes the minority position on economic grounds, or even on reasonable political economy grounds. (The profession is all-but-unanimous on keeping the gas tax, as Greg Mankiw notes. And for good reasons.) Rather Caplan’s argument is a convoluted political rationalization: (1) the high gas prices engender populist anger that might lead to bad policies, (2) yes, a gas tax holiday is a bad policy, but (3) one can make a political argument for the gas tax holiday because it is not as bad as some of the other “populist nonsense: price controls, rationing, windfall profits taxes…” that we might get instead. This political argument is a bit of a stretch as it is, but he then goes on to make it absurd by supporting “a pairing of an excess profits tax with a gas tax holiday” on the grounds that it is not as bad as “an excess profits tax all by itself.” Apparently two bad policies are better than none.
This sort of reasoning makes me sympathize with political scientists who tell economists to leave the politics to them. A more straightforward political argument would have been “Hillary is the best candidate and so one can justify anything that will get her nominated.” Or the symmetric argument for John McCain, who originally proposed the gas tax holiday in April. But the New York Times editors, sensibly, would not have chosen to print such op-eds, out of the hundreds that are submitted every week. So they printed instead an economist’s political argument too complicated for them to understand. If they are going to do this, they might as well print economists’ economic arguments too complicated for them to understand, which they are seldom willing to do.
Bryan Caplan is a perfectly competent economist, with a Ph.D., a job and an interesting book and everything. (He may be a bit too desperate for publicity. But those of us who live in glass weblogs can’t throw stones.) Why would he spout the nonsense that is in this op-ed? The answer is very clear: it is the way to get into the New York Times. He gleefully admits as much on his blog today: “I’ve finally made the Gray Lady: Today’s New York Times features my op-ed inspired by Sunday’s post, I’ll Shill for Hillary. I hope critics don’t misrepresent me as an economic apostate; I’m not dissenting from the standard analysis… look on the bright side: I’m in the New York Times. Sweet!”
Bryan: A suggestion. You should now write a letter to the New York Times retracting your op-ed on the grounds that you should have known that readers would incorrectly infer that you were supporting the policy on economic grounds. [Arnold, can you help out here?] If you do this, the Club of Economists might let you back in. Plus, you will have gotten your name in the NYT a second time! “Sweet!”
“Caplan’s argument is a very convoluted political rationalization…”
Convoluted? Let’s see. Some voters are ignorant. Some voters are distressed. Some are both. If a politician has to sell some snake-oil, better it be the non-lethal variety.
“You should now write a letter to the New York Times retracting your op-ed on the grounds that you should have known that readers would incorrectly infer that you were supporting the policy on economic grounds.”
Erm….Caplan says:
“So far, I pretty much agree with the consensus. Economists might overstate the rigidity of supply — it’s possible that eliminating the tax could spur producers to find a way to squeeze out a little more gas — but they’re probably right that the Clinton-McCain proposal will not shrink the price at the pump”
Reply to Meiguoren:
Thank you for your comment.
(I) Regarding “Convoluted” — It is true that a careful reader can infer that Caplan’s policy ranking is (1) first best: do none of these populist measures, (2) second best: do the gas tax holiday together with the oil company windfall profit windfall tax, (3) third best, do the gas tax holiday alone, and (4) worst, do the windfall profit tax alone. He is then making the political judgment that option (1) is impossible, and so supports (2) or (3), as being superior to (4). I don’t necessarily agree with the ranking of (2) through (4), and I don’t agree that we economists ought to give up on the possibility of (1) which could well happen. But my main objection to his whole logic is that the main supporter of the windfall profits tax is Hillary Clinton herself. So “shilling for Hillary” [Caplan's self description] seems inappropriate in the context of gas prices. (Incidentally, I have long been a supporter of the Clintons, having worked in the White House 1996-99. But this time she has gone too far.)
(II) Regarding my sentence that Caplan “should have known that readers would incorrectly infer that [he was] supporting the policy on economic grounds.” — I believe that the New York Times’ headline, callout, and decision to print the op-ed in the first place all probably gave the average reader this incorrect impression. This was predictable.
I think the fundamental problem with Caplan’s political “game theoretic” (as some call it) argument is that it is most likely wrong. If the gas tax is cut, so politicians appear to be “doing something” then the odds are that the price will rise in response to demand (as Caplan admits). The consumers will then, in Caplan’s world, be totally looking for the head of the oil companies because they “stole” that 18 cents.
So instead of ameliorating with “bread” those stupid masses, as Caplan argues, the masses are promised bread and given nothing.
Riots ensue.
His argument is (a) misleading and (b) wrong.
Has it really been proven that demand for gas is very price elastic? It seems to me that the whole reason people call higher gas prices an additional “tax” is because gas prices are actually inelastic. (i.e., substantial variances in gas prices does not significanly change consumption habits). In fact, I’m pretty sure that the overall amount of gas that the US has consumed has either remained stable or increased DESPITE gas prices nearly doubling over the past few years. Doesn’t that mean demand for gas is relativley price inelastic? And if so, then a 5% decrease in gas prices should NOT result in increased demand for gas. I certainly don’t plan on taking an extra road trip or driving around the block a few extra times if the price of gas is cheaper.
Reply to Kevin,
The price elasticity of demand for gasoline is low in the short-run, but higher in the long run. Typical estimates, e.g., from a meta-analysis by Molly Espey, average -0.26 in the short run (defined as less than one year) and -0.58 in the long run. If one looks across countries, the inverse relationship between gasoline prices and gasoline consumption per person is dramatic. Even in the US, the experience after the 1970s oil shocks is that, with a delay, consumers started shifting to smaller more fuel-efficient cars (and then shifted back when gas prices went back down). There are claims that the price elasticity has fallen in the US since then. But I am skeptical. Analysts are often caught by surprise twice, first when the response to high prices is low in the short run, and then again when it rises in the long run. The process may be starting again now, as American consumers begin to leave their SUVs for Priuses.
JF
[...] I realize that higher energy taxes are politically out of the question at this point. But I could imagine legislation that would automatically raise energy taxes if and when oil prices fall, thereby putting a floor at recent levels and providing industry with the clear incentive to undertake the long-term investment in energy-saving equipment and technology that we badly need. Rebate the proceeds by fixing the AMT, or removing the payroll tax on low-income Americans, one answer to the income distribution point. In any case McCain’s proposal for a gas tax holiday is a spectacularly bad idea. [...]