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Why Lower Gasoline Prices Are Not Stimulating Economy
Seems like an academic theory unrelated to reality.
In my anecdotal experience, except for the small minority that manages finances diligently, I don't think people's spending habits are determined by such a micro analysis of cash flow even sub consciously. Most people don't even seem to know what their cash flow is from day to day or even month to month let alone react to small changes. How the heck can one claim that such micro changes are getting balanced out? People waste tens of dollars everytime they visit a grocery store without looking at prices carefully or even knowing wherher something is cheap or overpriced. Are they going to react to to such small changes in gas prices to buy more?
Spending habits seem to be determined primarily by job security, changes in their wages, wealth effect from rising asset prices, sentiments based on what their neighbors, friends and relatives are buying, any addictions and the latest bank statement. So, perceived changes in the financial situation in the order of hundreds or thousands of dollars might affect behavior that is measurable, the rest would appear to be in the noise. It is like dropping a leaf on choppy seas and trying to explain why the ripples didn't measure.
Sometimes, economists need to get out into the real world.
Recently I decided to take a road trip and drive 1500 miles this winter rather than use Jet fuel to get where I was going. Four fill - ups came to about $120. Hotel room for 1 night on the road came to $75. A cooler full of drinks/snack kept my food costs around $25. Flying could have been as cheap as ($80 flight +$40 taxi ride) so I agree there's a lot of personal choices going into how people choose to spend their income.
I'm not sure what it is about gas prices, but it seems like one of those comparison price products that I will drive around town (I now use Gas Buddy) to find the best price. I typically fill up at Costco these days and call it good.
Also, why are we still pricing gallons of gas to the nearest 9/10 of a cent at the pump.
Also people's psychology of when to fill up is interesting. I have a friend who I have stopped giving rides to because he get too anxious when he looks at my gas tank needle and it happens to be under a half of a tank.
Comments
In my anecdotal experience, except for the small minority that manages finances diligently, I don't think people's spending habits are determined by such a micro analysis of cash flow even sub consciously. Most people don't even seem to know what their cash flow is from day to day or even month to month let alone react to small changes. How the heck can one claim that such micro changes are getting balanced out? People waste tens of dollars everytime they visit a grocery store without looking at prices carefully or even knowing wherher something is cheap or overpriced. Are they going to react to to such small changes in gas prices to buy more?
Spending habits seem to be determined primarily by job security, changes in their wages, wealth effect from rising asset prices, sentiments based on what their neighbors, friends and relatives are buying, any addictions and the latest bank statement. So, perceived changes in the financial situation in the order of hundreds or thousands of dollars might affect behavior that is measurable, the rest would appear to be in the noise. It is like dropping a leaf on choppy seas and trying to explain why the ripples didn't measure.
Sometimes, economists need to get out into the real world.
I'm not sure what it is about gas prices, but it seems like one of those comparison price products that I will drive around town (I now use Gas Buddy) to find the best price. I typically fill up at Costco these days and call it good.
Also, why are we still pricing gallons of gas to the nearest 9/10 of a cent at the pump.
Also people's psychology of when to fill up is interesting. I have a friend who I have stopped giving rides to because he get too anxious when he looks at my gas tank needle and it happens to be under a half of a tank.