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Gas Prices Aren’t Just In Our Heads
Gas prices are in everything — as America’s city-dwelling journalistic class should remember.
“How Gas Prices Get in Our Heads,” fretted James Surowiecki for the Atlantic this week. “
“Few things in life, it turns out, can make us feel gloomier than a spike in gas prices can,” began Surowiecki, gloomily. “But on the flip side, judging from the new consumer-sentiment numbers, few things can make us feel more optimistic than falling gas prices.”
After crunching a few numbers, Surowiecki seemed unimpressed with the impact gas prices have on the Average American Wallet. After all, he reasoned, when gas prices go up — even by two dollars — it doesn’t cost that much more to buy a tank of gas. So why are Americans so upset — in poll after poll — about spending a measly extra $60 a month filling up?
“The psychological impact of rising gas prices, then, is greater than their actual economic impact,” he mused. “Why? Well, the demand for gasoline is, at least in the short run, inelastic: People can’t significantly reduce the amount they drive in response to higher prices. And there is no substitute for gas: You can’t fill your tank with olive oil. So rising prices make people feel trapped and deprived of the ability to control their spending.”