The economic benefits of fracking

From Marginal Revolution.

"The new NBER paper by Erik Gilje, Robert Ready, and Nikolai Roussanov shows some truly impressive economic benefits:

We quantify the effect of a significant technological innovation, shale oil development, on asset prices. Using stock returns on major news announcement days allows us to link aggregate stock price fluctuations to shale technology innovations. We exploit cross-sectional variation in industry portfolio returns on days of major shale oil-related news announcements to construct a shale mimicking portfolio. This portfolio can explain a significant amount of variation in aggregate stock market returns, but only during the time period of shale oil development, which begins in 2012. Our estimates imply that $3.5 trillion of the increase in aggregate U.S. equity market capitalization since 2012 can be explained by this mimicking portfolio. Similar portfolios based on major monetary policy announcements do not explain the positive market returns over this period. We also show that exposure to shale oil technology has significant explanatory power for the cross-section of employment growth rates of U.S. industries over this period.

Do note that $3.5 trillion figure is not a measure of social value.  It does not count the losses to coal companies for instance, nor does it measure the consumer surplus or the “greener energy” benefits from fracking, among other factors."