WSJ Argues That Hybrids Are Bad for the Environment: A Little Economic Training Is a Dangerous Thing

Chris Kulczycki wrote a good piece in the Daily Kos this morning about how WSJ's Holman W. Jenkins makes the seemingly absurd argument that hybrid cars are bad for the environment.

Hybrids



Jenkins seems to take some valid yet counter-intuitive arguments from economics and use them to draw false and self-serving (though only self-serving in the short term) conclusions. It's too bad that no properly trained economists are weighing in on this. My own understanding of econ is rusty to negigible at this point, but I can see some kernels of truth in what he's writing.

(MORE AFTER THE JUMP ABOUT FLUCTUATION EFFECTS, PRICE THEORY, ETC.)



Yes, in the short term, using hybrids will not affect the overall consumption of oil (because the demand is so high and the markets so open that others will pick up the slack), or probably even the price (he seems to use a really oversimplifed version of price theory, but don't ask me to clarify until I can spend a little time rereading old textbooks).

Jenkins' point is that someone is going to be using the oil, and the oil will run out eventually no matter what, so it might as well be us using it at the lowest possible prices until it's all gone. That's how to maximize our self interest, according to Jenkins. This view does not take into account more subtle economic analyses, though (such as fluctuation effects), which suggest that that probably wouldn't be in our short or long term self interest.

As a commenter wrote in the Daily Kos comments,

Monopoly power: The oil cartel can manipulate prices even though it does not actually control all of the world's oil. If demand contracts, the oil cartel can simply contract [supply] a bit, bringing prices back to their original levels. This therefore conserves oil. It will still get used, eventually though.

When some users stop consuming, others users will consume more, because the price is lower. But on aggregate, they will not consume the same intial amount. Unless the consumers have very strange long-run preferences.

And as someone elsewrote in the European Tribune,

He knows that the reduction in oil consumption in cars, if there is not control in the [supply], will lead to the use of oil in other parts of the economy because of the low prices. Of course, he forgets that hybrids are the technology to use when the quantity of oil is reduced and you want to keep a smooth increase in the prices according to demand and [supply].

So he forgets fluctuation effects because he never heard about them. The fact [is] that consuming Hummers will lead to extreme fluctuations in price making hte life of the middle-class awfull... but he does not give a damn.

Consuming more oil to depend less on Middle East? he is an asshole, the fact that the ratio of oil from the Middle East is LESS DOES NOT MEAN THAT THEIR RELEVANCE IS LESS

These are actually interesting arguments that I will think about more after I finish this overdue project I was supposed to hand in at 9...

Tags: Wall Street Journal, hybrids, daily kos, prius, environment, supply and demand