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May 04, 2008
Economists against the gas tax holiday... why was that, again?
Jabberwonk posts the open letter signed by a number of economists opposing the gas tax holiday. Here's the key paragraph.
There are several reasons for this opposition. First, research shows that waiving the gas tax would generate major profits for oil companies rather than significantly lowering prices for consumers. Second, it would encourage people to keep buying costly imported oil and do nothing to encourage conservation. Third, a tax holiday would provide very little relief to families feeling squeezed. Fourth, the gas tax suspension would threaten to increase the already record deficit in the coming year and reduce the amount of money going into the highway trust fund that maintains our infrastructure.
Read closely all of the reasons behind why so many economists oppose the gas tax holiday.
Now look at how the NY Times summarizes it.
An open letter signed recently by more than 100 economists said the proposed tax holiday would do little to reduce gas prices. In part, that is because a fall in prices would lead to more demand, which would cause prices to return to their earlier level. The result would be that overseas oil-producing governments would get money now flowing to the United States government in gas taxes.
The whole sentence about demand is the sort of circular statement that we caution our students not to make but that newspapers print all the time. Not only is it a terrible misstatement of demand vs quantity demanded, it's not even consistent with the claim (advanced by Krugman among many) that supply is fixed.
The Times' statement that oil producing countries would get some of the gain is only true insofar as gasoline production (and therefore oil consumption) would actually increase. As I have pointed out, that effect is likely to be small though positive. I wouldn't call it my main objection to the tax holiday. The open letter is careful to say that "it would encourage people to keep buying costly imported oil and do nothing to encourage conservation," in effect implying that it spending on oil could stay the same as the "fixed supply" adherents would suggest.
Students writing term papers often rephrase the words in an article that they cite, and occasionally the rephrasing ends up changing the economic meaning of the passage (sometimes with comic results). I see this all the time. If I had a nickel for every time I said to myself while grading, "That's not what that article really meant, was it?" I'd have a pretty big collection of nickels. Likewise when I read the Times article, I immediately said, "That can't be what was written in that open letter, can it? No economist would say it that way." Indeed, they did not.
I suppose the Times could say that the paragraph in question was not a summary of the letter but their own analysis. But that would be just as bad, wouldn't it?
Bottom line: Members of the media sometimes have trouble quoting economists correctly because we don't always fill in all the blanks. The media (and students writing term papers) want to fill in those blanks, and sometimes they get it quite wrong. Understanding that people want to fill in those blanks (and understanding the ways that they are tempted to do so) goes a long way toward making you a better communicator of economic ideas.
Posted by William Polley at May 4, 2008 11:05 PM
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