The visible hand in economics

Treading on our human rights!

Posted on: April 24, 2008

Being urged to blog, I shall respond with a counter-knee-jerk against kneejerking by others. http://www.stuff.co.nz/4492587a11.html is a link to a great DomPost article, one of the most recent in a series that reports on the rising outrage amongst the New Zealand population as petrol prices rise. Does anyone else get the impression that New Zealanders believe they have a human right to cheap petrol? So we’ve constructed whole aspects of our economy and society around cheap petrol. So now we’re feeling the pinch in a whole lot of ways… Well, cry me a river, people! Granted that the effects of a price rise are likely to cut the deepest on low-income families who aren’t those driving Pajeros to the dairy and back, isn’t it about time we started paying something even approaching the true cost of this environmentally disastrous stuff? We’ve no entitlement to be profligate with fossil fuels when their use is threatening our climate system (a.k.a. the thing what makes the earth a liveable planet). If it takes a price rise to wean New Zealanders off the private car and onto walking or – shock, horror! – public transport, then it’s a damn good thing.

Metrosideros

Advertisements

1 Response to "Treading on our human rights!"

Great to see you posting Metrosideros, but I’m not sure I agree with you. Not all price rises are a good thing: we need to consider why the price is rising. If it is rising because of rising costs to the petrol company then the optimal price (taking into account the environmental externality) is also rising. In this case, the price rise doesn’t necessarily get us any closer to the efficient level of driving.

If the price rise is due to collusion in the market then the efficient price isn’t changing and we are indeed getting closer to the efficient level. However, in this case the petrol companies rather than the government is getting the revenue from the higher prices. We may see that as a social cost and thus think that the price should be lower because of equity concerns, despite it being closer to efficiency.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Add to Google
%d bloggers like this: