The Difficult Concept of a Global Market

According to poll results published in today’s New York Times,

Over all, 54 percent of poll respondents believed that a president can do a lot to control gas prices, as opposed to 36 percent who believe they are beyond a president’s control.

It appears that a majority of those polled have difficulty with the concept that prices in a global market are set globally.  I’m not surprised, because variations on the same mental hurdle show up in discussions of whether it matters if we import oil from country A or country B, or if oil prices are quoted in dollars or euros.

Since the first and most important step in teaching is deconstructing erroneous priors, I hope those whose job it is to teach economics will address these misunderstandings as explicitly as possible.  Take time to find out what students think about how the global oil market works before launching into your prepared explanation.  Drill down to the underlying assumptions and hold them up for scrutiny.  Minute for minute, time spent on unlearning false knowledge is far more valuable than time spent on developing a more sophisticated grasp of the better stuff.

It was also help enormously if media outlets like the Times would make it clear that there are right and wrong answers to questions like the president’s control over gas prices.