Thursday, July 6, 2017

Car Regulations

The government's regulations call for a required average of 54.5 miles per gallon on new cars and trucks by 2025. The requirement will vary with the size of the car or truck, so each company will face a different required fuel economy average that varies with the size-mix of its sales. This is after the Obama administration had already raised the overall required average to 34.1 mpg for 2016.

One can only guess at the damage these regulations will do as we desperately turn to cars we do not want run by technology that does not yet exist.

Margo Oge, former director of the Office of Transportation and Air Quality in the U.S. Environmental Protection Agency, tells the story in her book, Driving the Future. Oge had a large role in designing these regulations and negotiating for them within the Obama administration and with the auto makers, both foreign and domestic. Her book helps readers understand how this extreme regulatory requirement came about.

Michael Greenstone, chief economist on the Obama White House's Council of Economic Advisers, challenged her. In her telling, she had reported a finding that the higher price of the more fuel-efficient car would be more than offset by the saving in fuel expenditures.  She quotes him as saying, "The consumer won't fully value these fuel economy benefits, so we should discount them by 50 to 80 percent." If car buyers were not already demanding cars that had the fuel efficiency she was trying to achieve, it must be because there were other negatives besides the higher upfront price of the car. Those negatives might be the cars' performance, esthetics, safety, or other features.
Summarizing her interaction with Greenstone, Oge writes, "The idea that the market functions perfectly is a powerful political and theoretical obstacle to fuel economy regulations."
"Perfectly.' Do economists really believe that?

Henderson writes in his review of her book: 'If one sentence crystallizes the problems caused by Oge's lack of understanding of economics, it is this one, written about the then-freshly formed Obama administration: "There will be others, even within the new administration, who are ideologically opposed to the regulations--as is almost inevitable in any room filled with Washington lawyers and academic economists." She, in short, sees economists--even ones in the Obama administration--as being ideologically opposed to regulation rather than being opposed because of their understanding of both markets and regulation.'

So opinions are not "reached," rather they are "felt."

Passing knowledge, general information--these are not good qualities for anyone other than a coffee-house raconteur. But amazingly these administrators are shameless in their partial understanding of these gigantic topics.
And they are astonishingly na├»ve in their assessment of people who do not agree with them. 

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