Wednesday, July 26, 2006

# Posted 11:22 PM by Ariel David Adesnik  

HIGH OCTANE POLITICS: Warren Brown writes about cars for the Washington Post and I think his column is great. But it turns out he doesn't think his fellow journalists are getting the story right:
The reigning American mythology is that it's automobile manufacturers that are primarily responsible for getting more miles per gallon...

The mythology forms the core of the Environmental Protection Agency's annual report of "stagnation" in the automobile industry's efforts to improve the fuel economy of its cars and trucks.

And of course the media, vested with the operative mantra that it is their mandate to "afflict the comfortable and comfort the afflicted," buy into all of this, dutifully reporting, with very little context, how well or poorly certain companies are doing in improving the fuel economy of their vehicles.

The reality is something else altogether.

The reality is that any consumer in America who wants to buy a car that gets at least 30 miles per gallon most certainly can do so. The reality is that, until recently, such cars have languished on dealership lots because there was absolutely no incentive to buy them...

Consider the matter of sport-utility vehicles, the favorite targets of the myth of all-powerful corporate advertising. Rare is the company, automotive or otherwise, that would make a product or provide a service that no one wanted. But the automobile industry gets blamed for selling gas-thirsty SUVs, accused of pushing them on a reluctant, unwitting public, as if the people who have the intelligence to earn the income to buy SUVs aren't smart enough to just say no to a truck they don't want.
(15) opinions -- Add your opinion

I think this is fairly obvious to most people who have ever set foot on a car lot. It's too bad the media thinks most americans are just dimwitted idiots. Maybe it's just me, but I feel like more and more "serious journalism" reads like a tabloid designed more to sell than to inform. It's one of the reasons I think most people find journalists untrustworthy.
This "journalistic" approach is not surprising coming from a segment of people who are fundamentally suspicious of a market-based economy. They're more comfortable with a model where manufacturers dictate market demand to the consumer class, all of which, of course, is centrally managed by the government.
I know this is highly biased, but doesn't it seem that the same journalists who want the government to regulate the economy are also accusing the government of incompetance in the middle east and New Orleans? How does that square?
The SUV phenomenon is surely more than any one of these factors. Probably the most important though is their classification as light trucks, resulting in the somewhat perverse tax incentives for buying a bigger car. There is no doubt that this loophole could have been filled by congress when the manufacturing industry started heavily advertising it in their early SUV campaigns. It wasn't. Of course, people also like them. But I bet they would like them far less if hey had to pay their full value, let alone if the vehicles, and the gas they burn, were fully environmentally costed.
Probably the most important though is their classification as light trucks, resulting in the somewhat perverse tax incentives for buying a bigger car.

Which *tax* incentives would those be, Taylor? The only tax incentive for an SUV has to do with a higher limit of deduction for small-business owners purchasing a vehicle of higher gross weight.

Perhaps you meant that the classification affects how it goes in the CAFE standards? That is, of course, addressed in the article. A great deal of the buyers who shifted to minivans and SUVs did so from other heavy full-size cars like station wagons. SUVs and minivans replaced the station wagon because of CAFE, yes, because people with kids wanted large cars to haul them around in. CAFE tried to make certain kinds of cars illegal, rather than simply imposing something approximating a true cost on them.

Some people do use SUVs or minivans or light trucks for hauling things in their business. I certainly think it ends up being too much government and injurious to civil liberties to do too much work trying to figure out why people use their cars, though. Neutral solutions like gas taxes are a better idea; it's a clean, simple, nondiscriminatory approach.

Certainly if gas taxes were raised people would like them less, yes, Taylor. I certainly agree with that (and think that it would be a good idea), as does the original author.

CAFE is not a good solution; higher gas taxes are much better and more environmentally and economically efficient.
"The reigning American mythology is that it's automobile manufacturers that are primarily responsible for getting more miles per gallon..."

And just where did Brown get his evidence for this claim?

The CAFE standards are perhaps his best evidence - but they don't in fact demonstrate a "mythology". Rather, they reveal the mindset of people oriented towards the exercise of government power. If you don't like something, pass a law, make a regulation. Force people and companies to comply! If there is an oil shortage, set the speed limit to 55, forcing an equal cost on those driving small, efficient cars and those driving gas-guzzlers.

Note that this is equally the mindset of the vast majority of the right as much as the left.

I would likely be identified more with the left than the right, but I would prefer a market-based solution that would force consumers to assume the external costs of fuel use. The problem is, that would mean a carbon tax, and we all know what the reaction of the right to any proposed tax increase would be. So since the market-oriented (hah!) right would quash a market-based solution, CAFE is the default - an attempt to impose virtue by fiat. Which much of the left and the right, except the libertarians, usually favor.

What I do hold against the big three is their short-sighted pursuit of immediate profits and failure to be ready for shifts in the market. Its the same story as the 70s oil-crunch - there are more profits in the bigger vehicles, so make only minor efforts in the family sedan line, effectively giving away market share. Perhaps those executive compensation packages weighted to emphasize rising share prices are the real culprit?

Re: Mr Phillippe. A market economy depends fundamentally on government regulation, starting with the definition and defense of property rights, continuing with the monitoring and enforcement of contracts, the establishment of uniform weights and measures, the regulation of currency, protection against fraud, etc. Why do you think the most widespread and robust markets are found in countries with powerful and effective governments? The issue isn't whether the government should regulate the market, it is about a) whether the regulations encourage people to enter the market by reducing the risks otherwise associated with transacting with strangers, or b) whether the regulations limit innovation and the expression of choice. But I am amused about how you seem to blame journalists, as if people didn't have unmediated opinions?
> But I am amused about how you seem to blame journalists, as if people didn't have unmediated opinions?

Thanks to campaign finance laws, "people" and "journalists" do not have equal free speech rights. (Those laws, curiously enough, were strongly pushed by the group whose speech was favored.)

In other words, the circulation of peoples' opinions is restricted relative to journalists' opinions.
Of course, while some of the regulation that's mentioned here can only be provided by a government, it's easy to overstate the requirement for government intervention. In a lot of cases, the standardization you're mentioning comes from industry bodies that arise because the industry has an interest in self-regulation. Standard time zones are an excellent example- they were created by the railway industry in 1883, without any government demand or intervention at all. It's probably fairer to say that the most robust economies are found in countries with powerful, effective, and limited governments - most Western European governments are obviously powerful and effective, but their economies are so overregulated that their GDP growth is anemic.

My suspicion: academics and journalists tend to dislike the capitalist system because the operation of the free market in those fields is pretty merciless.
CAFE is becoming irrelevant. It hasn't showed up yet in government statistics, but surely the recent high gas prices and changes in buying behavior are resulting in an increase in average mileage among new-car sales. SUV sales are dropping, Ford and GM are in trouble, and consumers are switching to Toyota and Honda's high mileage vehicles. The result is that if you calculate the average MPG of cars that are actually being driven off the lot, it is surely increasing faster than any CAFE standards require.

There is no need for gas taxes or higher regulatory standards, not any more. The commodities market foresees continual oil shortages and will keep prices high for years to come. The era of cheap gas is over and we can only look forward to more expensive fuel. In this environment the only problem is going to be managing the shift in market preferences and cushioning the transition to manufacturing the high mileage vehicles which are in demand.

Ironically, change is happening far faster than any regulator would have dared impose, and there is nothing the manufacturers can do about it. In fact, I wouldn't be surprised if domestic car companies call for regulatory support to somehow force people to buy the low mileage cars that they need to unload, maybe protectionist measures to drive up the price of high mileage imports.
Mr. Hess,
There's a difference between governments regulating the exact quantity in a gallon of gas, and how much a producer should charge for that gallon of gas. I think we all agree that the government should regulate certain aspects of an economy, and property rights are certainly an important one. However, governments should not be telling companies what they should produce, even though many times they do.
Mr Freeman -
Yes, journalist's opinions circulate more widely than those of an average citizen - but surely this was the case even before campaign finance laws?

Mr. Anonymous -
Which journalists and academics are you talking about? Do you think capitalism and markets make for a harsher environment in academia and journalism than in say, automobile manufacturing or retail hardware?

For most people, capitalism is all they know - the fish doesn't critique the sea she swims in; she's too busy trying to eat and avoid being eaten. Academics and journalists make their living by studying the sea we swim in; one would hope for a more critical perspective than average.

"Free Markets" is somewhat less than a complete oxymoron; it is perhaps best thought of as a banner flown by some who idealize markets rather than study them.

Self-regulation will only work when there aren't incentives to become a free rider, and it doesn't eliminate the possibilty that the chosen regulation may generate externalities. In the railroad case, the externalities were positive for society as a whole. Other externalities can impose social costs.

The weak growth in many European countries is, as you say, a sign of over-regulation - innovation is risky and, under pressure from the public, they've missed the balance between risk (for employees) and innovation.
I've spent my life working around academics, manque and successful, and married into a professor's family, so you'll pardon me if I roll my eyes at one more manifestation of what appears to be academic self-regard, couched in mediocre metaphor: "Academics and journalists make their living by studying the sea we swim in." They swim in it themselves, Mr. Hess, and what's more, they're competing for a very few minnows, as anyone with experience of the job market for humanities PhDs can tell you. Nice little condescending note there about hardware salesmen, but the fact is, it's a lot easier to find a retail job than an academic position. The compensation may not be great, but at least you get health care, which is more than many adjuncts can say. And if the figures quoted in one recent blogospheric controversy over a dismissed adjunct are correct, at $32,000, the basic compensation isn't really all that much worse. One might hope for a more critical perspective than average, but circumstances often affect judgment.

Some externalities are positive and some are negative, but that's the case with any economic action - there are certainly positive and negative externalities to government intervention. The question is which set of externalities is the greater, and which actor's decisions, once made, are harder to reverse if the externalities prove to be negative. The wrongdoing of corporations in the twentieth century pales (in cases where it wasn't collaborative) beside the wrongdoing of states.
Mr. Phillippe, of course, has put his finger right on one of the basic contradictions that handicaps the Democratic Party - it wishes to suggest that government effort and involvement are useful policy tools, but it's beholden to the government employees' unions, whose interests lie elsewhere.
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