The Case for Small Government

A Libertarian Perspective on Economic and Social Policy

March 23, 2006

Fuel Economy

The Bush administration has proposed revising current fuel economy standards to include SUVs and vans weighing more than 8,500 pounds. Pickup trucks above 8,500 pounds would still be exempt. The fuel economy standards, known as CAFE (for Corporate Average Fuel Economy), impose minimum miles-per-gallon requirements on each manufacturer’s fleet. Current regulations apply only to vehicles weighing 8,500 pounds or less.

Rather than expanding existing fuel economy regulations, the administration should abolish them. Fuel economy standards serve no useful purpose.

Fuel economy is distinct from pollution. Exhaust from cars is a reasonable object of government regulation since it adversely affects everyone. Fuel-inefficient vehicles, however, affect only people who choose to buy them.

The desire to reduce U.S. dependence on foreign oil—the usual justification for fuel economy standards—is misguided. OPEC and other producers must sell their oil somewhere. If a country like Saudia Arabia tried to use oil as a “weapon,” the U.S. would buy oil from third parties who had purchased it from Saudia Arabia.


At 11:22 PM, Blogger LP Mike Sylvester said...

I could not agree with you more.

We have far too many government regulations as it is.

We should abolish several entire agencies; The Federal Department of Education would be a great place to start...

Mike Sylvester

At 12:48 AM, Anonymous Anonymous said...

Trouble with this is that the cost of various externalities such as some significant portion of our military expenditures are not currently factored into the price of oil. While it is obviously better to tax gas to reflect these externalities, I think believing this will happen is roughly equivalent to believing in the tooth fairy- failing this happening any way of essentially increasing the cost of gas is acceptable to me

At 6:02 AM, Blogger Mike Huben said...

Amazing. An economist who doesn't believe in benefits of efficiency.

Fuel economy standards for passenger vehicles save the United States over 55 billion gallons of fuel annually... CAFE standards have been met largely through cost-effective measures such as engine efficiency improvements and weight reduction, with no decline in vehicles' interior volume or safety.

I'd call a roughly $100,000,000,000 annual savings significant to the economy.

At 7:51 AM, Anonymous Anonymous said...

I'll stick that "55 billion" in the "unknowable statistic" category and I'll stick the whole statement into the "vacuous" category.

Even if it were true, it only proves that the regulations aren't needed because the fuel efficieny of a vehicle is part of its price and if two identical vehicles have different fuel economy, consumers will obviously choose the cheaper one. Companies know this; competition and higher gas prices would drive them to this anyway and you wouldn't haven't to deal with command-and-control regulations and additional government bureaucracy so, of course, the market outcome is preferred.

At 2:38 PM, Anonymous Anonymous said...

The desire to reduce U.S. dependence on foreign oil is misguided because of the word "foreign". We should be reducing our dependence on oil generally.

I don't understand your logic distinguishing fuel economy from pollution. Say Person A needs to drive 15 miles to work everyday. They can do it in a Hummer and use a around 2 gallons a day, or drive a Prius and use 1 gallon every 2 days. Driving the Hummer will produce a lot more pollution for the same distance travelled. How can exhaust be a reasonable object of regulation but not fuel inefficiency?

At 3:10 PM, Anonymous Anonymous said...

I'm with Eric on this one...

At 3:35 PM, Blogger Michael Lomker said...

>I don't understand your logic distinguishing fuel economy from pollution.

You seem to be assuming that all vehicles produce the same amount of pollutants given a specific amount of fuel burned. That is certainly untrue--catalytic converters and many other technologies have lowered pollutant output over the years. Focusing on pollutants would encourage reduction of those pollutants on all fronts--fuel modifications, engine tweaks, etc. rather than focusing strictly on a quantity of gasoline burned.

At 4:17 PM, Anonymous Anonymous said...

michael lomker,

Check out the EPA website on SUV's. The cars that pollute the most are getting the worst MPG. Mandating more fuel efficient cars will lead to less gas being used, and thus reducing pollution.

I don't think CAFE standards are the only way, but I believe they are one way of achieving this goal.

At 4:20 PM, Anonymous Anonymous said...

Here's the site I referenced above:

At 5:51 PM, Anonymous Anonymous said...

VERY, VERY respectfully, I disagree with you Dr. M. I think it is helpful to think in terms of pollution generation. But that is only part of the issue. Of even greater importance is eliminating our dependence on oil, especially foreign oil. I agree that vehicle standards are rediculous. As far as I am concerned, the only way to achieve that is through very high taxation on gasoline, offset by reductions in other taxes.

At 7:12 AM, Anonymous Anonymous said...

increase miles per gallon, fuel saver, increase gas mileage

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