Another Look At Economic Behavior

Economics is all about behavior when you get right down to it. On the one side, we have the products and services we want and need to live, while on the other side, we have the products and services we can afford. When products and services go up in price, most of us have to make choices as to which products and services we will cut back on or eliminate all together.

Two essential products for many of us living in the United States have seen a rapid rise in price over the last year and they continue to rise. Food and gasoline have shot up and people and their families are now squeezed by these two price increases. As for food, people can change their eating habits to a certain extent. They can buy cheaper cuts of meat or even switch from meat to poultry. Many Americans, including myself, can stand to eat less and exercise more. Children, on the other hand, need their nutrition and good health care, as they are this nation’s future.

The price of gas has changed people’s behavior somewhat as gas consumption is down. As the price of gas goes up still higher, more people will be forced to modify their behavior and drive less. Those of us who can use public transportation will “discover” new reasons to use it. The automobile, that once was an engine of our economic cycle along with housing, may become an even smaller component of our economy in the near future. I am not talking about $4 a gallon gas. Gas in many parts of European and the rest of the world is twice that price. At $8 a gallon, economic behavior will almost be forced to change. Gas, once believed to be an example of inelastic demand, will have reached its point of elasticity.

Real estate, housing to be precise, and its location to public transportation and jobs will become a factor for many many people. The location of housing will become a bigger factor where people will be able afford to live. The city and neighborhoods near urban centers will receive a second look as the price to commute to work enters more and more into the equation. Family budgets may find products and services once thought to be a necessity no longer a necessity for survival.

And why all this change? Because there was not enough leadership in this country for the last 35 years when it came to a long term energy policy. It is my opinion that Americans could have afforded $8 a gallon gas if the price had been a gradual increase over the last 35 years. But, unfortunately, importing so much foreign oil was not seen as a national security issue.

I find it interesting that the congress is so upset with a foreign hedge fund buying into the American owned railroad CSX. I will grant you that this major American railroad is a factor in our national security, but why is not oil of equal importance? The fact that we let ourselves become so dependent upon foreign oil that our trade deficit has placed our economy in such a weakened condition is not a national security issue? Or, is it the fact that with all those recycled petrodollars sloshing around the streets of Washington, D.C. that it makes the oil crisis not an issue of national security? How much foreign oil money buys influence in Washington, D.C. today? Why should we only be concerned with ownership of railroad property and not the ownership of our representative’s vote?

I have been asked, “what are the answers?” I do not have all the answers or even a fraction of the answers. If I did, perhaps you would be listening to me on CNBC, MSNBC or CNN. I doubt whether FOX would have any use for my questions or answers. But, one thing is for sure, people need to vote. Write their representatives and tell them the things that need to be done. Most representatives know little if anything about money or the economy. They know one thing: it takes a lot of money to run an election campaign. Too much nonsense goes for serious dialogue in our political-economic discourse. We all need to challenge our leaders to raise the level of debate. We did not get into this situation over night and it will take years to correct our deficiencies. But, a good place to begin is raising our level of economic understanding and pushing our leaders to discuss the issues of inflation, trade and budget deficits, and the role taxes plays as a modifier of behavior. Stay tuned.