The aftermath of hurricanes Katrina and Rita have proved a massive breeding ground for what former OECD Chief Economist David Henderson has termed “Do-it-Yourself Economics” (DIYE), which he defines as “firmly held intuitive economic ideas and beliefs which owe little or nothing to textbooks, treatises or the evidence of economic history.” The DIYE phenomenon is not restricted to the general public. <?xml:namespace prefix = st1 ns = “urn:schemas-microsoft-com:office:smarttags” />Henderson points out that DIYE ideas are “sincerely held, and voiced with conviction, by political figures, top civil servants, CEOs, [labor unionists], well-known journalists and commentators, religious leaders, senior judges and eminent professors.” Sadly, these ideas might do real harm to the U.S. economy.<?xml:namespace prefix = o ns = “urn:schemas-microsoft-com:office:office” />
A sterling example comes from the august pages of the New York Times, which recently editorialized in favor of a tax on gas to keep the price at $3. The reason for keeping the price high, the Times asserts, is twofold: to defund the paymasters of terrorism in the Middle East and to combat global warming. A moment's thought shows that the Times should realize that artificially raising the price of gas will not hurt rich Salafi ideologues but native communities in Alaska and oil-rich developing economies of the third world. In a world of falling demand caused by high gas prices, it is those who produce gas the cheapest — the Saudis and their friends — who will continue to sell it.
Meanwhile, the economy will suffer as enterprises that had been profitable cease to be so. Businesses that require affordable transportation will fail, and people will lose their jobs. That means less money going back into the economy. Recession is inevitable; the Times' solution that we return to a welfare society based on the Earned Income Tax Credit ignores both the lessons of history and the fact that many of those who will lose their jobs have such low incomes that they do not pay tax. Moreover, as the National Academy of Sciences confirms, smaller cars mean more deaths on the road.
The result of the Times's policy will be an oil industry concentrated more than ever in the hands of the terrorist funders, recession in America, and carnage on the roads. And this will lower the rise in global temperature by a few hundredths of a degree. Even the Times should be able to see that's a price not worth paying.
Read the complete article at National Review Online.