There is another dimension to Paul's article. Two actually.
A SMOOTH, PRICE-INDUCED 'CONSERVATION'
The first is a hope, explicit or not, that expectations of permanently higher prices will produce conservation or innovation-induced reductions in demand in sufficient quantity to prevent (a) significant (distortionary) inflationary pressures and (b) an adverse price-spike large enough to produce serious economic dislocation.
I'd put that first hope as an odd-off bet. Markets tend to move quickly and in a way that will produce the most pain to the most participants, when they are ... freed of 'fundamentals'. What's more, the Reason article I mentioned indicates that all the 'pain' of the 70s produced a 13% drop in demand over ten years ('73-'83), back when the demand elasticities were a LOT higher (probably more than double, if you just look at the oil share of economy as a very imperfect proxy). Could this time be different? Yes, of course. But that's not the odds - IF you play the odds.
LIBERAL GOALS
Are liberal goals best served by pretending that there is no bubble? Isn't that kinda like conservation without the work of conservation? Does a false belief in scarcity justify the ends?
If it does, I hope that's not the role of an economist. This is how they get into trouble, mixing 'science' with 'policy'.
THE BUBBLE
Here's the real kicker, having said that. It's probably counter-productive to argue about whether a bubble exits or not. I suspect one could be no more convincing today than when Greenspan uttered the stupendous phrase, "irrational exuberance", that ended up encapsulating a whole period. They shouted him down then, and they will now.
Put another way, there is no point to my "arguing" about it. The 'scarcity' folks have the high ground. For now.
SAYING MASS FOR TRANSIT
A propos of nothing:
Apart from congestion concerns, I'm not sure why mass transit is a "good" in itself, except insofar as 'solutions' are beneficial, even if short-term. The good in itself would be near zero-cost technology for personal transport, with other means priced for ... entertainment value / luxury value.
If I do the rigorous thing of throwing in non-cash costs (AAA passes out estimates every year), like depreciation on the car, that's about 6-cents a mile for us. Our breakeven(s) come to $9.65 and $3.65/g. I can't include insurance or maintenance - we don't have a yes/no choice on that, because we must have a car, which is true for the vast majority in almost every location in America, since circa 19xx? These are unavoidable, fixed costs - what's good for GM is good for America, didn't you know. {:-).
NO PASS ON SAVINGS FROM MASS TRANSIT SYSTEMS
I am unaware of any mass-transit system that has passed on savings due to increases in ridership to its customers, except perhaps airlines, where competition is nearly perfect, down to the cost of the last sandwich packed. Our prices for mass transit have only gone up (mostly blamed on nat gas price rises under Bush).
ENERGY DEREGULATION COSTS WE BEAR
To add insult to injury, in NJ we continue to pay a recovery tax to utilities that was gifted as a "give" for transitioning to ... the wonders of energy deregulation. (Perhaps that will work out about as well as 1990s telecom deregulation, which has produced costs in America for broadband services far in excess of similar services in Europe, so far...). Still, we are far better of than Californians, who were vivisected by private energy.
PEOPLE DON'T INTER-MODAL VERY WELL ROUND THESE PARTS
Quite a while back, a decline in competition caused local long-distance bus trip fares to nearly triple in the space of a few years, where they have since "plateaued" (even fallen a bit in nominal terms as gas prices have soared over the past three years and more in real terms - what does that tell you?)
