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The budget cuts in Washington will have many unintended consequences. One of the worst, in my opinion is the loss of good data. A case in point is the EIA which publishes data on energy production and consumption. (see here)
One of the big and current debates in economic theory and policy is whether QE2 has led to an increase in commodity prices (including oil) or whether the jump in commodity prices stems from increasing worldwide demand for commodities. Another way of asking the question is whether the jump in gas prices stems from real or nominal events. If the data is not collected, we can't answer the question empirically. If we can't investigate the issue empirically, we are back in the world of competing ideologies leading to theoretical conclusions and policies. If data comes from vested interests, it can not be trusted. So who and what can we believe?
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We need information, without it we are lost and not information is free from bias, so we are stuck in a pickle. The best news sources are not, lets say Fox News, but cutting spending in seemingly innocent Energy Information Administration will not aid the economics.
ReplyDeleteIf economists cannot investigate the issue emperically, we'd be philosophers.
I've read quite a few articles regarding the QE2, the majority of which seem to be against it. Although it has kept stock prices high, the inflation that has come along with it seems to have made prices in every day things (such as food) skyrocket.
ReplyDeleteBut then again, these article all hold extreme bias, and appear to be manipulating the data, or simply do not give any hard evidence.
Simply put, we NEED to collect data, because without reliable sources collecting this data there is no way to trust it. I think it is extremely important to avoid bias whenever possible in regards to data/information. Without trustworthy information you can throw economic theory right out of the picture, because there would be no emperical evidence supporting the theory.
ReplyDeleteI agree with all of you. During our reading of "this time is different" we all said over and over again how reliable the authors were because of their vast data analysis. Without that type of analysis and access to valid information, we are stuck as to how to interpret or if to believe what is left.
ReplyDeleteI think the increase in oil prices steam from both real world events (increased demand and possible supply decreases (Libya and peak oil)) as well as nominal events (increased speculation).
ReplyDeletePersonally I think oil prices are a speculative bubble, and like all speculative bubbles, they at some point must pop. The question then becomes - when will oil become too expensive to be economically supported resulting in the bubble popping and oil prices plummeting. I do not know, but what I do know is that oil is incredibly inelastic meaning we could see a run up for quite some time.
Anyone who has been following oil prices will have noticed that barrels were at around 120 earlier this week and have now settled below 100. Could this be a small leaking hole in the oil bubble or will we again see speculative oil buying resume and a resulting increase in price? My guess is more buying.
I have to agree with Matt that data is necessary for the increased transparency that is integral to avoiding major crises. This article truly made me think twice about our leadership in the White House and Congress both. We are in an energy crisis, but somehow they think the solution to this crisis is to cut back on collecting the data vital to understanding it. The government needs properly allocate money to the appropriate sectors in a smarter fashion and avoid making cutbacks just to make cutbacks. I also have to agree with Chris, in that oil prices are a speculative bubble. I am taking a Contemporary Africa class right now and much of the bubble is due to the civil and social unrest in Africa. African dictators like Mugabe, Gadhafi, and previously Mubarak were bleeding their countries dry of resources. The unrest has led to higher oil prices and as long as these issues are not solved oil prices will be higher in the short run.
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