|
One is that money is ubiquitous, so something bad happening tends to affect everyone and captures everyone’s attention.
That isn’t true of, say, weather. A hurricane barreling down on Florida poses no direct risk to 92% of Americans. But a recession barreling down on the economy could impact every single person—including you, so pay attention.
This goes for something as specific as the stock market. More than half of all American households directly own stocks.⁵⁷ Even among those that don’t, the stock market’s gyrations are promoted so heavily in the media that the Dow Jones Industrial Average might be the stock-less household’s most-watched economic barometer.
Stocks rising 1% might be briefly mentioned in the evening news. But a 1% fall will be reported in bold, all-caps letters usually written in blood red. The asymmetry is hard to avoid.
And while few question or try to explain why the market went up—isn’t it supposed to go up?—there is almost always an attempt to explain why it went down.
Are investors worried about economic growth?
Did the Fed screw things up again?
Are politicians making bad decisions?
Is there another shoe to drop?
Narratives about why a decline occurred make them easier to talk about, worry about, and frame a story around what you think will happen next—usually, more of the same.
Even if you don’t own stocks, those kind of things will grab your attention. Only 2.5% of Americans owned stocks on the eve of the great crash of 1929 that sparked the Great Depression. But the majority of Americans—if not the world —watched in amazement as the market collapsed, wondering what it signaled about their own fate. This was true whether you were a lawyer or a farmer or a car mechanic.
Historian Eric Rauchway writes:
This fall in value immediately afflicted only a few Americans. But so closely had the others watched the market and regarded it as an index of their fates that they suddenly stopped much of their economic activity. As the economist Joseph Schumpeter later wrote, “people felt that the ground under their feet was giving way.”⁵⁸
There are two topics that will affect your life whether you are interested in them or not: money and health. While health issues tend to be individual, money issues are more systemic. In a connected system where one person’s decisions can affect everyone else, it’s understandable why financial risks gain a spotlight and capture attention in a way few other topics can.
In 2008 environmentalist Lester Brown wrote: “By 2030 China would need 98 million barrels of oil a day. The world is currently producing 85 million barrels a day and may never produce much more than that. There go the world’s oil reserves.”⁵⁹
He’s right. The world would run out of oil in that scenario.
But that’s not how markets work.
There is an iron law in economics: extremely good and extremely bad circumstances rarely stay that way for long because supply and demand adapt in hard-to-predict ways.
Consider what happened to oil immediately after Brown’s prediction.
Oil prices surged in 2008 as growing global demand—much of it from China—crept up to potential output. A barrel of oil sold for $20 in 2001 and $138 by 2008.⁶⁰
The new price meant drilling oil was like pulling gold out of the ground. The incentives for oil producers changed dramatically. Hard-to-tap oil supplies that weren’t worth the fight at $20 a barrel—the cost of drilling didn’t offset the price you could sell it for—became the bonanza of a lifetime now that you could sell a barrel for $138.
That sparked a surge of new fracking and horizontal drilling technologies.
The Earth has had roughly the same amount of oil reserves for all of human history. And we’ve known where the big oil deposits are for some time. What changes is the technology we have that lets us economically pull the stuff out of the ground. Oil historian Daniel Yergin writes: “86% of oil reserves in the United States are the result not of what is estimated at time of discovery but of the revisions” that come when our technology improves.
That’s what happened as fracking took off in 2008. In the United States alone oil production went from roughly five million barrels per day in 2008 to 13 million by 2019.⁶¹ World
oil production is now over 100 million barrels per day—some 20% above what Brown assumed was the high mark.
To a pessimist extrapolating oil trends in 2008, of course things looked bad. To a realist who understood that necessity is the mother of all invention, it was far less scary.
Assuming that something ugly will stay ugly is an easy forecast to make. And it’s persuasive, because it doesn’t require imagining the world changing. But problems correct and people adapt. Threats incentivize solutions in equal magnitude. That’s a common plot of economic history that is too easily forgotten by pessimists who forecast in straight lines.
Do'stlaringiz bilan baham: | 
