Garett Jones  

Nominations for Top Economic Stories of 2012

Predictions are Hard, Especial... Where Tiebout Goes Wrong...
Here are three, all good news, more possible:

1.  QE3, all hail Scott Sumner.  The ECB's unconventional easings to banks and sovereigns deserve mention as well.  Perhaps someone will make a lot of money betting on high average inflation in the OECD, I doubt it. 

I suspect that gerontocratic deflation will be a strong temptation for OECD central banks over the next few decades, glad they've resisted that urge so far.  

2. Taking Shale for Granted. The Bakken formation's massive shale deposits were literally the stuff of urban legends a few years ago. This year, according to a Reuters survey of energy analysts and others, financial professionals are about evenly divided on whether or not shale is a big deal.  Debates about the economic power of North Dakota have shifted from tinfoil hats to pajamas to pinstriped suits (PDF) in just a few years.  

The future of shale is uncertain but it's reasonable to believe the supply curve for carbon-based energy is fairly flat.  

3.  Driverless Cars Becoming Legal. So far: CA, FL, NV.  In April I tweeted:

A thin edge of the wedge for Google Cars: an alternative to driver's licenses for some of the elderly. Voter demand meets tech solution.

Nobody wants to take away Grandma's car keys, partly because nobody wants to drive Grandma everywhere.  In October, Google CEO Sergey Brin said this at a press conference with California Governor Jerry Brown, after noting that driverless cars would be a boon to blind individuals: 

Some people have other disabilities, some people are too young, some people are too old...

I hope that 2013 offers many more good economic news stories.  

COMMENTS (5 to date)
John Thacker writes:

Regarding #1, I think it's especially interesting that in gerontocratic Japan it's popular opinion that is pushing the idea of more QE and more inflation, instead of bureaucrats pushing it on an unwilling aging population.

mike shupp writes:

I'll happily believe there's lots of oil in the Bakken shale deposits. Other hand, I seem to recall that back about 1973, when we were enjoying the first of several poltically-caused "energy shocks", the costs for extracting a barrel of oil from the ground in Saudi Arabia ran to about 50 cents an barrel. Various marketing and licensing fees and transportation costs immediately raised this to 2 bucks a barrel -- for something which was generally sold for about 6 bucks a barrel at east coast US ports. Profitable business, oil!

Of course there's been some inflation over the last 40-50 years. A factor of eight maybe, a factor of ten? Okay, it ought to be the case that oil costs 20 bucks a barrel to pull out of the ground and ship out of Arabia, and it should sell for 60 bucks a barrel today to maintain that profitability.

So. Is Saudi oil -- or other Middle East oil -- profitable today at a US selling price of 60 bucks per barrel? This isn't terribly clear, but wotthehell! oil isn't selling for 60 bucks per barrel, it's more like 100 bucks. And Arabia's running out of oil anyhow. America will lead the world with our nearly inexhaustable supplies of super duper cheap 100 bucks per barrel shale oil! Or inexhaustable suppplies of $200 per barrel oil. Or $1500 per barrel oil.

All that 1980's-1990's-2000's worrying about Peak OIl and ever rising energy costs ... nah! that was all made up! It had nothing to do with reality! Closing one's eyes solves every pretended problem, right?


Silas Barta writes:

What do you mean by gerontocratic deflation? I mean, I know it's "decreasing prices due to aging of the population", but how would it be deflation? When more of the population stops producing and continues to consume, that means higher prices in general, right? Certainly, it will be *less* depressed in stuff the elderly will stop using, but how is this supposed to mean lower prices?

The most politically favorable solution to the budget crises is inflating our way out of it, in any case -- not good for the non-elderly...

alex steff writes:
What do you mean by gerontocratic deflation?

I don't understand it either. Even google returns no results. I would argue that in aging societies workers will become scarce and thus can demand higher wages. Even without a raise in worker's productivity.

But ultimately it's up to Mr. Jones, enlighten us please! :)

Bob Knaus writes:

A gerontocracy is rule by (and presumably in the interests of) the elderly. Deflation benefits creditors at the expense of debtors. Substitute "old" for creditors and "young" for debtors and there you have it.

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