Environmental Economics

Can you say “narrative fallacy”? Seems like when anything at all happens, the media feel compelled to make up a complicated causal story. Doesn’t matter very much whether the story is true – or even whether the story is too far off the wall to be characterized along the lines of true or false.

There could be several theories that the media is considering here:
1. Economic gravity!
2. People who sell gasoline also buy things at retail. Therefore, since they’re selling less, they’re also buying less. It’s logic!
3. People who sell gasoline are evil and are responsible for causing all bad economic trends, like falling retail sales. If they can’t sell gasoline, they won’t let anyone else sell their things!
4. Those “Warning: Falling Prices” signs at gas pumps and retail stores are scaring too many consumers away, because they are in fear for their lives.

Tim, I’m not following your confusion.
1) Gas prices fell.
2) Therefore, gas sales fell. (People buy an approximately constant amount of gasoline per month, so when prices fall considerably, the sales–in dollars–also fall.)
3) Consumers did not spend 100% of their gasoline savings on other retail products, so the decrease in the gasoline sales component of “retail sales” was not offset by increases in other components. Therefore, overall retail sales fell.

Matthew, I can partially see where your coming from…when prices fall and demand is inelastic, total revenue (sales) falls. So lower gas prices will decrease total gas sales. But I’m having a hard time wrapping my head around the contra-argument that higher gas prices would be viewed as a boost to retail sales.

If someone wrote “Energy sales increased this month due to higher gas prices”, I doubt you’d find that surprising. Because you naturally think of “gasoline” as a part of “energy sales”.
You don’t naturally think of “gasoline” as part of retail sales–you think of Walmart and Best Buy. But it is, in fact, a part of the “retail sales” index, and that’s what the story was reporting on.

Tim, Frankly, I was just looking at the chart, which shows a strong positive correlation between retail sales and gas prices. I don’t understand how the author’s claim “It is apparent that a loss in consumer confidence as gas prices rise coincides with a loss in retail sales” is supported by the chart.
(It makes sense that high gas prices are correlated with poor consumer confidence–people “want” to buy things that aren’t gasoline, and their survey responses presumably reflect that.
And if they plotted “retail sales ex-gasoline”, I would expect that to decrease with increasing gas prices as well.)

Are they measuring sales in total revenue instead of quantities? Decreased revenue would make sense with lower prices and inelastic demand.

Surely it’s just that the US economy is going down the toilet… but I’m not a macroeconomist… then again those economists surveyed had the wrong sign on growth, so they don’t know what is going on either.