Picking a Path

We’ve all learned that the shortest distance between two points is a straight line. That tends to lead one to believe that the scenic path (e.g., longer route) will take more time to travel. But what if that is not the case? As it turns out, Newtonian physics shows this intuition is wrong. Introducing the brachistochrone curve: a curve which drops quickly at first, letting a ball roll along its path to gather speed, before flattening out toward the end. The key here is that the shortest distance does not produce the shortest time traveled. The lesson is simple but counterintuitive: minimizing time may require accepting sharper adjustments earlier rather than smoothing the path.

Could America be facing its own brachistochrone curve? The war in Iran is already imposing difficulties on our economy. Oil prices have surged, reaching and in some cases exceeding $100 a barrel, as disruptions in the Strait of Hormuz flowed quickly to markets. Now we’re getting early signs of waning business confidence; the latest Purchasing Managers Index from S&P Global’s March Flash PMI fell to an 11-month low. America’s economy could be searching for a new equilibrium, one which reflects the newly introduced exogenous shock. Growing pressure raises a critical question: what is the fastest path to a new economic equilibrium?

Attempting to answer that question requires the heroic assumption that other variables hold steady, admittedly an unlikely circumstance. Nevertheless, here are a couple of potential paths. A linear trajectory might involve supporting the economy by tapping the Strategic Petroleum Reserve and possibly offering temporary fiscal relief from the federal government, attempting to mitigate pain while hoping the conflict resolves itself quickly. But if the war does not end shortly, the quickest path could be to let markets make tough adjustments (likely higher prices) which then might incentivize other behaviors like using other forms of energy, altering consumption habits, and further shifting supply chains. These and other actions could make our economy more resilient to shocks of this nature, but it is too early to know whether a dramatically new equilibrium will indeed materialize.