Stephen Karlson (shkarlson) wrote in 50bookchallenge,
Stephen Karlson
shkarlson
50bookchallenge

A LITTLE HELP FROM MY FRIENDS.

When Keith Bradsher's High and Mighty:  SUVs: The World's Most Dangerous Vehicles and How They Got That Way came out, a great deal of the reaction focused on the pop-psychology of the customers, with Gregg Easterbrook noting all the marketing research that developed an appeal to what he refers to as buyers' reptilian brains.  David Brooks responded with a gripe against killjoy geeks.  Some commentators even brought Jesus in.

I recently found a copy of the hardcover version at Half Price Books.

Professor Munger has helpfully provided the material for Book Review No. 25.

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.

Mr Bradsher has some of the economic analysis correct, some not.  He notes the political horse-trading by which large hatchbacks become "trucks" (the same horse-trading made possible the first minivans, which some analysts credit with saving Chrysler the first time it was bailed out).  But at page 414 he completely misses the consequences of the very policy he has questioned.

If a family living through the oil crises of the early 1970s were to be magically transported to a present-day car dealership, they would be astounded to find that America had found a way to have its cake and eat it too -- to have safe, roomy cars with decent gas mileage and negligible pollution.  But the same time-traveling family might be aghast to walk out the doors of that car dealership and look out at a street today.  Instead of driving large cars, the nation's best-educated, most affluent families have switched to tall, tippy monstrosities with mediocre brakes that block other drivers' view of the road and inflict massive damage during collisions.

Those monstrosities -- and here I include minivans and pickup trucks, because they are as hard to see around, and even more sluggish -- probably contribute to traffic congestion, although inertia in those reptilian brains and maltimed traffic lights have something to do with it.

But ending the plague of big, sluggish passenger trucks does not require an Act of Congress.  Here are excerpts from pages 419-420.

A big increase in gasoline prices would be the most effective way to prompt Americans to drive fewer miles and choose lighter, more aerodynamic vehicles with more [fuel] efficient engines. ... But the auto industry's market analyses suggest that with SUVs being purchased by prosperous families who care little about the cost of filling a tank, it would take a permanent increase in prices to as much as $2.50 a gallon [in 2002 prices] to have a big effect on sales of new SUVs.  A price increase on this scale is very unlikely.

I was playing around with this interactive Energy Information Administration chart (choose the Regular Gasoline Retail Prices series and use the sliding scale to show the range 1974 to 2011) and conclude that a price increase on this scale is current experience.  But there is no easy way, according to Mr Bradsher, to turn those price increases into a more sensible fleet of private vehicles.  Page 424.

Providing an incentive for automakers to address safety as well as energy conservation and global warming is not easy, and would require a more complicated set of fuel-economy rules.  The rules could get so complicated that they would be vulnerable to manipulation by the auto industry and its lobbyists.

That's the fatal flaw of rulemaking: where policies generate rents, there will be rent seekers.  Mr Bradsher has the opportunity to suggest that the safe family sedans of The America That Worked(TM) did not disappear because the Invisible Hand swept them away.  He hints at, but never quite develops, the possibility that the fleet of family cars might have become safer and less fuel-intensive in the absence of the fuel economy standards and the special provisions for so-called light trucks and commercial vehicles.

(Cross-posted to Cold Spring Shops.)
Tags: business, current events, economics
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