CFLs and CAFE

PREFACE: COOL! I'M AN IDIOT. HOW HARD IS IT TO READ BY-LINES? I'LL LEAVE THIS AS I WROTE IT, BUT OF COURSE WILL W DID NOT EVEN WRITE THE POST I AM REFERRING TO....

Will Wilkinson is a bit like Andrew Sullivan. No, not THAT way (not that there is anything wrong with that).

What I mean is that if you know Will is writing on an issue, you have to read him to figure out what he thinks is the right answer. His views are complex, and tend to be derived from specific principles rather than broad ideological doctrines.

About 75% of the time, I think he is spot on. And the rest... well, here is an example. (NO! NOT AN EXAMPLE. WILL W DID NOT WRITE THAT POST. I ALWAYS WONDER HOW PEOPLE CAN GET ANGUS AND ME CONFUSED. BUT...ANYWAY, NOT WILL!)

He seems to take the libertarian paternalist line on CFLs. He appears to support "the Energy Independence and Security Act of 2007, which if allowed to go into effect next year would force Americans to pay less for the same amount of illumination, while starving the atmosphere of greenhouse gases. Patriots like Michele Bachmann and Rick Perry have stood up for the same principles."

Um...isn't it true that if CFLs really cost less for the same amount of illumination, no law would be necessary? (Full disclosure: I think CFLs actually DO cost less for the same amount of illumination, taking into account electricity, and buying and changing bulbs frequently. So every bulb in our house is a CFL or LED. The LEDs especially are great, 1.5 watts and cool to the touch, but the same light as a 25 watt incandescent). The point is that people must disagree about this. And to be fair we have NOT solved the CFL disposal problem, with a lot hazardous waste in the form of mercury. So it is not clear to me that adding light bulbs to the list along with crystal meth as banned substances is really in the service of any principle of liberty.

But then Will goes off on CAFE. (Again, full disclosure: I worked on CAFE for the Federal Trade Commission in the Reagan Administration, and have kept track of it since). I just don't see any principled defense of CAFE, on ANY grounds whatsoever. If you want European size cars and fuel efficiency, then you need a big tax on gas, and then let consumers make their own choices. Since the price of petrol is 1.5 Euros / liter in much of Europe, we are talking prices that are $8/gallon or more in US terms, double our current prices. We can agree or disagree that this would be a good thing, but if you want fuel efficiency that is what you would have to do.

Instead, we have CAFE. CAFE requires that each manufacturer calculate the harmonic mean, weighted by sales of different models, for everything it sells.

EXCEPT....except that there is a dispensation for trucks, including "light" trucks. We now call those SUVs. CAFE is their daddy.

So, to oversimplify only slightly, US car companies did not stop producing small cars in spite of CAFE; they did it BECAUSE of CAFE. CAFE, with its bizarre Jesuitical list of requirements and exemptions, made it impossible to sell full sized station wagons, but actually subsidized giant SUVs that got much worse gas mileage. The best selling American "car" has been the Ford F-150 pickup, for a long time.

And if you think that Americans, in 2006, say, actually wanted little tiny cars but were forced by creepy manufacturers to buy big ass urban assault vehicles, you are just wrong. US automakers conceded the small car market to foreign companies, but the reason is that those companies could take advantage of economies of scale in their home markets because of much, much higher fuel prices.

You really only have to know one thing: Toyota (TOYOTA!) makes a truck (originally the T150, a feckless ploy to copy the F150) that has a 282 hp engine, is five inches longer than a Ford F-150 double cab, and gets 18 miles per gallon. This truck is not sold in Europe or Japan, but the Tundra has been very successful in the US. It's huge!

There are two reasons. 1. Our gas prices are 1/2, or less, those of Japan or Europe. 2. CAFE creates a huge benefit to producing large, fuel-inefficient trucks and truck-like vehicles. It is possible that American consumers actually want station wagons or something in between, but CAFE effectively outlaws them.

So, when Will W says:

Mandatory energy-efficiency standards are a bit of a conundrum for a liberal outfit like The Economist. On the one hand, they clearly are an intrusion into the workings of the free market. On the other, they work. No one beyond the libertarian fringe seems to mind very much, they save us money that we would otherwise be too lazy or short-sighted to save for ourselves, and they’re normally designed in such a way that manufacturers manage to meet them without too much grief.

then he is just mistaken. CAFE has not worked. CAFE has made the problem much, much worse, in effect LOWERING the fuel economy of fleet of vehicles on American roads by forcing manufacturers to make heavy, inefficient trucks instead of station wagons and the cars that would have been purchased without CAFE.

Now, Will might well respond, "But you admit it is the EXEMPTION from CAFE that was the problem that distorted toward trucks!"

Isn't that always the way? When you try to restrict private choices, given incentives (in this case, artificially low gas prices), it takes a proliferating series of new, improved regulations because the problem keeps evolving.

We need a $4 per gallon tax on gas. We are paying huge costs, in terms of wars and hamstrung foreign policy, for our dependence on the Middle East. But we are in effect subsidizing the cost of gas to keep it low. As a result, people want cars that are inappropriately large. And then Will wants to use CAFE to solve the problem created by the subsidy. Then Will wants to extend CAFE to solve the problems created by CAFE.

Suck it up, charge the tax, and let people make their own choices. I'm pretty sure we'll see a lot more Ford Fiestas and fewer F-150s. Even in Iowa.