Wednesday, December 19, 2007

legislating everything (fuel economy)

As you may have heard on the news, the government is adopting new CAFE standards (fuel economy standards) and many politicians are lauding this as a major accomplishment towards fighting global warming and decreasing our oil consumption. As with gun control, universal healthcare, and other issues they seem to think that passing a law and having the government mandate standards will magically change things. The problem is that a little thing called the free market usually gets in the way.

When the AWB was signed in 94' you could still buy a pre-ban AR-15 and high-cap mags if you wanted, only they cost twice as much as they did pre-ban. Why? Because we now had no new production of pre-ban guns AND higher demand for pre-bans. When you have a finite supply of a commodity and increased demand people don't stop buying. Those that sell that commodity just charge more, and those willing to shell out the dough still get what they want.

I got C's in my college economics classes, and even I know these new CAFE standards won't work. Until the price of gasoline is high enough to cause a drastic change in consumption habits such laws will never work as intended. People are going to drive just as much as they usually would, regardless of the mileage standards the EPA puts on the window sticker of the car they're buying. People who are driving SUV's and V8 sportscars will continue driving them, and people who choose to drive small cars and hybrids will continue driving them. Why? because they'll drive what the choose to drive unless they are forced to change because of personal cost constraints. Demand for gasoline is for the most part inelastic.

And what happens when you force manufacturers to make cars that get better fuel mileage? I could just re-post my 20 page policy paper I wrote on CAFE standards my sophomore year of college, but it was a boring paper. Well one consequence is that automakers now have to spend more money either developing brand new vehicles, or changing existing models to adhere to the new standards. Anyone who thinks the cost of doing this won't be passed onto American consumers obviously slept through ECON 101. Look at ammo prices. The price of lead rose, and the price us shooters pay for ammo rose accordingly. Why? Cost offsetting. Businesses exist to make profits. If the government imposes a new cost burden on them they find a way to offset those new costs. Generally they're offset from the wallets of consumers. Another thing that happens is that automakers make existing cars lighter, since less weight = better mileage. Why do you think the "bumpers" on your car are plastic, thin as hell, and weigh maybe 2 pounds? This may save a bit in fuel economy, but it costs us far more in repair costs for fender benders. You can't even tap things with modern bumper covers without cracking or gouging them (just ask my mother, who's gone through 5 in as many years)

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