This Man Should Quit Politics and Become an Entrepreneur

by Don Boudreaux on May 29, 2006

Rep. Sherwood Boehlert (R-NY) believes that government must force automakers to increase the fuel-efficiency of the vehicles they sell. Here’s part of a letter that he has in Saturday’s Wall Street Journal, explaining:

Your editorial opposing fuel economy standards (“Not So Grande CAFE,” May 8) that the standards amount “to the government dictating the kind of cars Americans will be able drive, even if those cars aren’t safe on the road.” This is wrong.

First, the goal of fuel economy standards is to enable Americans to drive the cars they want — but that the automakers aren’t producing. And what Americans want is the full range of vehicles available now, including SUVs, but with greater gas mileage. The technology exists to create those vehicles affordably, car buyers want them, and the nation needs them. The fact that they are not on sale is a classic market failure.

…..

Rep. Sherwood Boehlert (R., N.Y.)
Chairman
House Committee on Science
Washington

…………………………………………………..

Rep. Boehlert whips the term “market failure” about too cavalierly. The believable existence of genuine market failure requires an institutional setting in which a significant number of individual decision-makers each bears too few of the consequences of his or her choices — such as when, for example, an owner of a factory upstream pollutes a river in ways that harm downstream owners of riverside land because downstream owners have no effective way to enforce their property rights to an unpolluted river.

But the situation decried by Rep. Boehlert has none of the institutional prerequisites for “classic market failure.” If a sufficient number of consumers truly are willing to pay for more-fuel-efficient cars (as Rep. Boehlert asserts), surely at least one of the 20-plus automakers now supplying new cars to the U.S. market would discern this fact — and, out of pure self-interest, act to satisfy this consumer demand. After all, if increasing a car’s fuel-efficiency would cost an automaker $X and if consumers are willing to pay $X+Y for such a car, then profits are to be had satisfying this consumer demand.

Rep. Boehlert doesn’t divulge in this letter his source of information about this alleged consumer demand, but surely now that he’s unearthed this valuable information, automakers will act on it voluntarily — assuming, of course, that the information’s source is credible.

Alas, I suspect that Rep. Boehlert’s source of information on this point is not credible — for, again, if Rep. Boehlert’s claim were credible, automakers wouldn’t have to be forced by government to satisfy their customers’ demands.

The arrogance and conceits of Rep. Boehlert and his ilk make me want to vomit.

{ 4 comments }

1 Steve White 05.29.06 at 7:28 pm

Forgive me if I’m wrong on this, but don’t each of the major automakers already make at least one small, fuel-efficient car that consumers may buy? I looked through the Memorial Day car ads and noticed that some car makers, like GM and Toyota, offer several such cars. If the demand is there, all the carmakers need do is ramp up the production of these cars (and perhaps offer more models).

Rep. Boehlert seems to have missed this, but I’m not sure how best to point it out to him. Do the moderators perhaps own a clue x 4?

2 John 05.30.06 at 12:51 pm

Actually, there is no reason that , just because some segment of the market desires a product, that an existing (or for that matter a new) producer will spring to meet the perceived demand. Lots of reason why not, including capacity, regulatory issues, lead/lag time to market, insufficient projected profit,
etc. etc.

I agree that it is not the “classic” market failure. It is, however, a failure of the market to meet a demand. Whether this is a good or a bad thing remains to be seen. But it is not clear (and I do not believe it to be the case) that the only reason that there are not more fuel efficient cars is because of lack of demand.

3 markm 05.31.06 at 1:04 pm

“If a sufficient number of consumers truly are willing to pay for more-fuel-efficient cars (as Rep. Boehlert asserts), surely at least one of the 20-plus automakers now supplying new cars to the U.S. market would discern this fact — and, out of pure self-interest, act to satisfy this consumer demand.” Back before there were any CAFE standards, there were in fact at least two brands in the US that specialized in tiny fuel-efficient cars: Volkswagon and Rambler, which was the flagship brand of American Motors at the time. Under CAFE standards, VW’s have evolved to look like any other car, and American Motors went out of business.

4 wavemaker 06.01.06 at 9:17 am

I would assume that the auto makers know more about what drives consumer choice than Mr. Boehlert. Sure, when gas prices hover at $3.00/gal for a while, more consumers elevate fuel-efficiency in the rank of what they are seeking in a vehicle in additioon to size, design, color, comfort, status, etc. But if my instinct is correct, the majority of Americans will continue to focus on size, comfort and status and just grumble at the pump.

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