Economics in action: Taking the BP oil spill from the headlines to the classroom
A lesson experienced is one more likely to be remembered. Lessons in regional economic impact are played out every day in the Gulf Coast region. The Federal Reserve Bank of Atlanta is home to the areas affected by the explosion and oil spill of the BP Deepwater Horizon drilling rig in the Gulf of Mexico in April 2010. This disaster, declared the largest accidental spill in U.S. history, continues to grasp news headlines that provide a rich source for classroom discussion of economics in action.
Measuring the economic impact of any significant event in our national economy takes time. Because the measurement data are backward-looking and cover a vast geographic area, we are often not aware of the subtle changes to the economy until the event is in the history books. The effects of the BP oil spill are ongoing, which adds to the complexity of measuring. Nevertheless, because the impact is regional, it provides a sort of "economy-in-a-bottle" perspective that lends itself to discussion of current conditions that help students conceptualize the economic implications of the event.
The Atlanta Fed continues to publish information about the impact of the BP oil spill (see the Related Links). Online newspapers covering the Gulf region have sections devoted to the oil spill that cover real-time concerns of the area. Here are some ideas for taking the oil spill from the headlines to the classroom.
Externalities occur when some of the benefits or costs associated with the production or consumption of a product affect someone other than the direct producer or consumer of the product. Externalities can be positive (benefits) or negative (costs). Unintended consequences are the unexpected and unplanned results of a decision or action.
A January 16, 2011, article in the New Orleans Times Picayune illustrates the old adage "In every crisis there is opportunity." The article cites many instances of decreased tourism spending along the Gulf Coast beaches but also says that hotel occupancy in New Orleans was up because of the influx of activity related to the cleanup efforts. In other words, the oil spill produced negative externalities related to the losses experienced by commercial fishing, tourism, and energy production, but it also produced positive externalities in the job creation and technology enhancements of the ongoing cleanup efforts.
In July 2010, U.S. Secretary of the Interior Ken Salazar announced a six-month moratorium on deepwater drilling, cautioning that additional deepwater drilling could cause "serious, irreparable, or immediate harm to life, to property, or to the marine, coastal, or human environment."
By Claire Loup, economic and financial education specialist, New Orleans Branch
February 28, 2011