What Exactly Concerns Us About Gas Prices?
By Justin Wolfers, New York Times
There’s no doubt that Americans are currently frustrated by high gas prices. And certainly many voters believe that “something oughta be done about it.” But why? Here’s a simple taxonomy of concerns:
1. Relative prices: Are people frustrated that a gallon of gas now requires more foregone “stuff.” Or alternatively phrased, are they concerned about the low relative price of “stuff”? Stated this way, it sounds a bit odd that we are so upset that the benefit of giving up one more gallon of gas is now a heckuva lot more stuff. (Indeed, environmentalists should be thrilled.)
2. Absolute prices: Are people concerned about the change in the absolute average price level? The consumer price index is currently 216.632; is this too high? If so, what is the right average price level?
