Even The Economist falls into the RFPC trap!

And obviously, whenever you “reason from a price change”,gets nowhere:

IN 2014 oil prices crashed. Americans jumped for joy. Small wonder: each year the average American consumes more energy than a Briton and a Japanese person put together. The oil-price drop pleased economists, too. Many were sure that it would give the economy a nice boost. However, the oil bust was followed not by a boom but a slowdown (see chart). Figures released on April 29th showed that growth in the first quarter of this year was just 0.2%. All this leads wonks to wonder: are lower oil prices such a good thing?



In the past few weeks, however, the oil price has stopped falling, so this deflationary effect is wearing off. Economists are left wondering how what seemed like such a big bonus for the American economy could have had so little effect.

Simple answer: It was no bonus! The drop in prices was to a significant extent the result of weak demand, with an also significant effect from an increase in oil supply.

3 thoughts on “Even The Economist falls into the RFPC trap!

  1. For the last two winters, GDP has been flat or down, and they say, “Well, bad weather.” The problem is, winters tend to have bad weather.

  2. Your point is well taken, but there is still something here to be explained. You attribute the drop in oil prices to a combination of weak demand and an increase in supply. The increase-in-supply factor must have been a boon to the economy; why, then, did the economy not perform better? I presume you will say that the increased oil supply was offset by other, negative factors; an actual explanation would specify these factors.

  3. Philo, a washout! Increased supply, decreased demand in the oil market plus a reduction in aggregatev demand growth. But the intention was to show the futility of conclusoions or predictions based on price changes,

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