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half a million jobs. Now let's imagine the i gure is doubled by booming
U.S. oil production, a stretch but still a useful limit. h e result will be
somewhere around another half million new jobs; this is not a trivial
number, but in an economy with more than a hundred million people
who want to work, it's not world-changing either.
Alas, even this can overstate the case. h e latest boom in U.S. oil
production emerged within a depressed economy. It's plausible that
many of the people newly employed in the oil sector would otherwise
have been unemployed. But a healthier economy doesn't work that way.
Jobs gained from strength in one sector are usually of set by jobs lost
in others.
44
Economists have long agreed that the unemployment rate
is determined by more fundamental factors such as how easy it is to
hire and i re people, how well the education system works, and whether
workers can easily move to jobs in new places. Booming oil production
won't change any of that.
It can, however, make Americans richer. h ink about a barrel of oil as
if it's a hundred dollars that's buried deep underground. Now imagine
you suddenly discover a massive deposit of a billion barrels that can
be dug up at a cost of sixty dollars each. (Equivalently, you develop a
new technology that can be used to extract previously unreachable oil
at this price.) If you spend sixty billion dollars to extract them, you
end up with a hundred billion dollars. h e extra forty billion dollars
in your pocket is essentially free: it is a pure windfall. h ose proceeds
are divvied up: the company doing the drilling takes some, its workers
grab a slice, and the government has its own take too. Unless you do
a massive amount of damage in the process of digging up the oil, the
country as a whole is bet er of .
How much bet er of ? Daniel Ahn, an economist at Citigroup whom
I've collaborated with on occasion, developed a model to try to i nd
out. h e model looks at historical data for the U.S. economy and
extracts relationships among things like oil, technology, employment,
and economic growth. It can consequently make tentative forecasts
about U.S. economic growth. h en Ahn layers on an optimistic fore-
cast for future U.S. oil production as the result of recent changes in
what technology allows us to extract from the ground. h e model tells
him it could boost U.S. economic output by as much as a couple of
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