Bad Economics: Oil and Schools

This past weekend, oil prices hit $100 per barrel.  Undoubtedly, gasoline prices will rise again, too, and the Democratic candidates responded at Saturday’s New Hampshire debates by warning of recession.  Even so, the major oil producers of the world don’t seem worried:  $100 isn’t high, according to OPEC.  They cite increased manufacturing costs and labor costs as reasons.

Oddly, we’ve heard this before.  Peter Maas, of the New York Times Magazine, warned a few years ago that prices of even $60 could cause a recession.  Inflation being what it is, we can expect that to be adjusted three years later, but I’m surprised that every time I read about peak oil and high prices, a too traditional (and limited) understanding of capitalism seems at work.

Oh no, you say, he isn’t going to write about economics, is he? Actually, yes and no.  Oil economics is merely an example of our culture’s limited thinking; it usually misses about 2/3 of the equation.

Every time oil companies discuss costs, they discuss the cost of manufacturing, of drilling, of refining more crude.  How often do they discuss the cost of producing raw crude or the cost of its environmental impact?

Here’s some real economics:

Scenario One:

Let’s suppose you and a friend are stranded in the desert with no food but a single basket of fruit. How long before you eat your first?  You have no idea when (or if) help will arrive. How do you divide the fruit?  Do you discuss its use or do you each consume as much as you wish without talking to the other?  Do you eat it all at once or do you space out its consumption?  Even though you’re in a desert, do you save some seed for potential regrowth?

This is the first third which is missing from our formula.  The cost of a barrel of oil never accounts for the price of its natural production.  It takes hundreds of thousands if not millions of years to produce (hydrocarbons created from biological products).  Since the amount of oil is not limited, how much do we charge for the environmental labor?  (Name one craftsperson who does not in part charge for the length of time spent on creation.)  I imagine such a commodity would be very valuable.

Scenario Two:

You and your friend take a picnic to a state park.  You pay the $10 admission and enjoy the afternoon. While there, you leave soda can tops and cellophane scattered about which kills some rare birds. The campfire you leave burning sparks a fire which destroys a few acres before being brought under control.  Does the state park hold you responsible and charge you?  On what do they base their fine?

This portion is easier to understand.  Every time we damage our environment, the degree and duration of the damage must be factored in to the cost.  If we knew that you would commit this act every time you entered the park, wouldn’t your admission price go up?  (Yes, you would be banned from the park, but banning Exxon from the planet is apparently not an option.)

And yet again, these prices are not figured into gasoline costs, just the middle third, production itself.  What is the cost of replacing oil in the ground?  What is the cost of repairing the damage done by oil consumption?  And—most importantly—if the oil companies are not paying it or placing it in their costs, who is paying for it?

I’m hardly the first to note this, but it’s worth considering for a number of reasons.  For me, the most important is that—in terms of economics and even logic—we tend to think in “now” costs, what it costs us today to complete a task.

I eat the candy now without considering the future weight consequences or health costs (or where the chocolate came from); I smoke the cigarette now; I say “plastic” at the grocery store because it’s easier; I even resolve a student discipline issue with a simple “suspension” rather than consider the factors which produced (and will again produce) the behavior or the impacts of what the suspension will cost us in future resentment.

True, this economic framework can be used in many cases, even education.  The education debate is focused around what we can do today to make students score higher on tests.  Occasionally, we consider the front- and back-end costs as well.  Poverty, drugs, and abusive families impact student success—therefore, this is a cost of education production. What can we do to ensure our young people are safe and have what they need before they reach the school?  What is the cost of a society which produces high-scoring ACT results but little in terms of job viability? What is the cost of producing a society which devalues art? Which “writes off” some students as drop-outs or, worse, passes them on with diplomas regardless of their literacy levels? These are all costs of education.

We can look at teachers as “Resource Input,” too.  What well are we drawing from to find them?  What methods do we use to train them, refine them, exploit them efficiently? Why does teaching have one of the highest attrition rates of all careers?

We have two basic choices about what schools will produce: people who contribute to and enhance the world (which means better resources to draw from later) or people who thoughtlessly consume and even damage it.  This means looking seriously at what “enhancing the world” might mean.  It doesn’t mean merely “finding a good job in society” or “getting into college” (which is merely a deferment of the question to a later institution).

The answer we’ve chosen so far is fairly clear.  We ignore 2/3 of the economics framework and pay only $3.00 for our gasoline today.  Let tomorrow’s students worry about the later cost.