One of the roads in our part of south Snohomish County has been nearly overpowered by development.
Not too long ago it was a little-used country lane, where horses were curious about passing cars and each weekday afternoon the household dogs would take their places at the ends of driveways to await the school bus.
While the road looks very much the same today, newly built housing in the area has transformed it into a commuters’ thoroughfare.
The road was never designed to be used by the sleep-deprived zombies or the cell phone-distracted drivers who now speed along its narrow two lanes of pavement. The resulting traffic meant the end of the run-free lifestyle for dogs, and took a heavy toll on the squirrels and other wildlife.
After a while, though, it seemed that the roadkill numbers declined, and since there were still plenty of squirrels to be seen scurrying around, some of us wondered why. Eventually the mystery was solved. Somehow the squirrels had discovered that they could safely cross the street by scrambling along the utility wires suspended above the road. There can be danger in that, surely, but they apparently can deal with that risk and prefer it to taking their chances on the blacktop.
In short, they adapted. What they did may not qualify as a biological adaptation in the Darwinian sense; we can leave that to a vastly over-financed scientific study of trans-generational fuzzy-tailed rodent behavior. But from an economics standpoint, they adapted. The cost of their earlier behavior was too high, so they adapted to the new situation.
There is no doubt that we humans can show those squirrels something about adaptability. We, and the economy, can and will adapt to the new energy situation. The economic policy question becomes this: Adapt to what? Are we better off, and better at, adjusting to higher prices in a competitive market or to shortages in a government-regulated one?
If the government does not interfere with the oil market, some consumers and other users of petroleum in our economy will adapt to higher prices by cutting back on consumption. Some will use public transportation more often, cut back on the number of trips by planning better and, in the longer term, gradually shift to vehicles with better fuel economy and move closer to their workplaces.
The government could, of course, ease this process by taking steps to increase supply. President Bush, for example, has sought a temporary halt to the environmental requirements for gasoline additives, the so-called boutique blends for different areas. While there was not much resistance to that move, he is also pushing Congress for authority to open up the Arctic National Wildlife Refuge to oil drilling, something that environmentalists strongly oppose. And, he is asking Congress and the EPA to take whatever action needed – including permit waivers – to encourage new oil refinery capacity.
The American people hold authority for the ultimate decision on these actions and proposals, but whether we favor them or not, they at least make sense in terms of economics. This is not the case with some other proposals that have been floating around.
The windfall profits tax, for example, is really a spite tax aimed at the friendless oil companies. The idea that such a tax would take the oil companies’ supposedly ill-gotten profits and return them to the people goes beyond being bad economics. It is an insult to the intelligence of the electorate.
The Congressional Research Service has already reported to Congress that the previous windfall tax, enacted in the waning days of the Carter Administration, actually made things worse during the 1980s oil crunch, by reducing supply and raising prices.
The temptation to do something about gasoline prices may prove irresistible to the Congress, though. Sen. Arlen Specter, R.-Pa., for example, is calling for a windfall profits tax even though we know that won’t work. Our own Sen. Maria Cantwell, D-Wash. wants to make oil price-gouging a federal crime, even though there is no evidence that gouging is playing a role in rising gasoline prices. And it seems that every elected official with access to a microphone is calling for an investigation.
None of this congressional posturing will help us and is in fact more likely to make things worse by creating shortages. Our best hope is in our own hands.
Charles Darwin, who got his survival-of-the-fittest idea from an economics text, once wrote that, “It is not the strongest of the species that survive, nor the most intelligent, but the ones most responsive to change.” In case you haven’t heard about energy prices, things have changed. So, we must adapt. If those squirrels can do it, so can we.
James McCusker is a Bothell economist, educator and consultant. He also writes “Business 101” monthly for the Snohomish County Business Journal.
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