$2.50 Gasoline?

An economist, questioned on her view
Of the tools in the President's purview
To cheapen our gas,
Responded: "Alas,
Cheaper gas isn't what would best serve you."

"If to prices in Europe we liken it,
We should surely impose a tax hike in it,
For unless it is dear,
We're too cavalier
For pooling or busing or bikin' it."

"The high price of gasoline" has loomed as a political theme this year, as sharply rising fuel prices have coincided with the US Presidential primaries. And yet, most economists agree that the problem with American gasoline prices is that they are too low, and encourage an excessive level of consumption. Noted behavioral economist Richard Thaler, in a New York Times op-ed piece entitled "Why Gas Prices Are Out of Any President’s Control," argues for higher gasoline taxes and points out that Greg Mankiw, advisor to Mitt Romney (and former advisor to George W. Bush), is among the prominent advocates of this policy. A gradual hike in gas taxes would give drivers the right incentives and help to reduce the federal budget deficit. However, in a political season in which one Presidential candidate - with a straight face - claims that his policies could bring about $2.50-a-gallon gas, no other candidate, whether incumbent or challenger, can safely endorse a sensible gasoline tax policy.

New Year's Resolution

A researcher of deep comprehending
Said: "To hold down medicinal spending,
One would certainly fare well
To take to the stairwell,
And spend 30 minutes ascending."

This past weekend, The New York Times asked its economics columnists to think deeply on the issues and solutions that may have an impact in 2012. Professor Richard Thaler, who teaches economics and behavioral science to business students at the University of Chicago, suggests that our national health care spending crisis can be ameliorated with a few "nudges" from employers. The thesis of “Nudge,” by Dr. Thaler and Cass R. Sunstein, is

that “choice architects” can often help people achieve their goals simply by making the necessary steps easier.

According to Dr. Thaler, employers can nudge their employees in the right direction by, among other things, subsidizing healthy foods in the cafeteria, enticing workers to use the stairs instead of elevators, and tweaking insurance plans to make life-saving prescriptions free, thereby encouraging patients to keep up with their medications.

Dr. Goose's Nobel Pick

Richard Thaler and Robert J. Shiller,
More empir'cal than Merton H. Miller,
Through the care that they gave your
Financial behavior,
Make footprints as great as Godziller.

The groundbreaking research by Thaler, of U. Chicago, and Shiller, of Yale, takes the study of finance beyond the purely rational approach embodied by 1990 Nobel Prize winner Merton Miller, into the more reality-based realm of "behavioral finance," thus having a greater impact on solving real-world problems.