Tuesday, December 30, 2014


It's so exciting to see gasoline prices in the low 2's. My wife's little car sips fuel and has a small tank: filling it the other day cost less than $20. I filled up my minivan for less than $50 yesterday. The drop in prices acts like a coupon for $20 per fill-up.  

But it's not a change in disposable income. And I'm getting increasingly aggravated when I hear journalists say that. 

Misuse of economic jargon like this is becoming to me what wreaths on the door in February has been to my wife. A change in disposable income would be the result of a change in personal income (all the wages, interest, profit, or rents coming into a household) and/or a change in the level of taxes and/or a change in transfer payments. Disposable income is the amount left over for a household to spend after the government gets its bit (or the household gets its entitlement). 

What's happening at the gas pumps right now is significant, for a lot of reasons. For us, it means our purchasing power grows. The dollars we're earning are able to buy more things because a very critical thing on which we rely has become significantly less expensive. In a broader sense, this drop in prices is significant in that it undermines the power of some regimes we dislike (like Vladimir Putin's), discourages some economic activity on which we are ambivalent (like fracking), and encourages some activity that might cost us more money in the future (like buying fuel-sipping automobiles). 

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