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The Buck Stops Here

One of the things I most love is when I make a pronouncement about something, and then events conspire to provide me with a ready-made example of why I'm right. It's even more satisfying than when it happens beforehand. When that happens, I look merely insightful; when the evidence comes about right after I post, I come across as prophetic.

For example, I've written several pieces recently about economics, with the main thesis being variants of "whenever the government tries to fix things, they just screw it up, and the free market tends to correct itself quite nicely on its own." (No, that's not an absolute rule, but it's true far more often than it's not.)

For example, I've cited the price of gas in the United States.

The government response has been -- to use a now-discredited but still potent analogy -- schizophrenic. Some have argued to raise taxes on gas to subsidize alternate energy. Others have pushed for "gas tax holidays" for the summer. Some want to hike the taxes on the oil companies. But for the most part, the response has been a whole lot of talk and no action. (I find myself wondering how much energy could have been harnessed if we'd insisted that all the politicians who made all these arguments were forced to do so in front of a windmill.)

The one thing they proposed that actually passed was an overhaul of the Corporate Average Fuel Economy (CAFE) standards. Towards the end of last year, they changed the law requiring that automakers sell vehicles that get an average of 35 miles per gallon by the year 2020. Note that this is an average across all they sell; if they sell one car that gets 25 MPG, they have to sell one that gets at least 45 MPG to keep the "average" up or pay a fine. Note, also, that they are not required to offer the vehicles, but actually sell them -- to people who have the choice to buy or not to buy. This leads to the companies offering hefty rebates on these vehicles, occasionally even taking a loss on the high-mileage vehicles.

Translation: "we'll actually pay you to take this car, because it costs us less to lose money on this sale than to pay the govenment penalty if our fleet sales don't meet their arbitrary rules."

Well, that's the government's solution to the current problem: talk a whole hell of a lot, then pass a law that won't kick in for well over a decade. I feel SO proud of our elected representatives.

So, how does the free market respond to the same pressures? With consumers actually acting in their own best interests, without the "help" of the government.

Cars outsold trucks in April for the first time in a generation, according to industry figures compiled by Autodata Corp., and four-cylinder powered cars outsold those with six cylinders under the hood.

Gee, why did all these people choose to do this now, instead of waiting to see what the government was doing? Could it be that they would rather take responsibility for their own fates, and not simply trust that well-meaning politicians and bureaucrats would -- eventually -- take care of their problems for them?

Nah. That would fly in the face of conventional wisdom, as evinced by the economic policies of the three leading presidential candidates, and who the hell could question them?

Anyone, I guess, with a smidgen of common sense.

Which excludes most politicians and bureaucrats.


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Comments (15)

See also <a href="http://ww... (Below threshold)
wolfwalker:

See also this article in the Boston Glob about how consumers are racing away from gas-guzzler SUVs and pickups, to save money on gasoline. I suppose when you're spending more on gas than on your monthly car payment, you tend to notice it.

Note that the trade-in prices dealers are giving on used SUVs are tumbling because nobody is buying even used SUVs. Note also that the auto dealers are worried about their huge backlog inventory of new SUVs -- so much so that they're offering huge incentives (aka price cuts) to get people to buy the damn things.

The law of supply and demand at work. Gotta love it.

There are always unintended... (Below threshold)
chsw Author Profile Page:

There are always unintended consequences. When vehicles crash, the occupants of the larger one are almost always less injured than those inside the smaller one, seat belt use and other factors being equal. Therefore, I wonder how long it will take the life insurance industry to squawk that the new CAFE standards are killing people and cutting into their profits?

chsw

Funny how supply and demand... (Below threshold)
JLawson:

Funny how supply and demand adjustment works a lot faster in a free-market economy than nebulous government decrees that take a decade to enact...

Actually, the "Glob" (great... (Below threshold)
Jess:

Actually, the "Glob" (great typo... or not) article is being disingenuous by linking the dollar value of a given truck rebate (4K) with another economic sob story, when the Chevy Silverado/GMC Sierra 1/2 tons had $4,250 rebates back in 2002...

J

Another fine example of why... (Below threshold)

Another fine example of why all government officials (both parties and elected or not) should be made to read Thomas Sowell's Basic Economics before they even so much as sneeze at anything to do with economic matters.

I propose a new amendment to the constitution... :) ;)

Good time to buy. ... (Below threshold)
ODA315:

Good time to buy.

Went to the dealer yesterday looking to upgrade my 2500HD 4WD crewcab GMC with the 8.0 liter (that's about 500 cubes to us rubes) for a new 3500HD Duramax.

Can't pull a 4 horse Bloomer LQ with a Prius.

btw, just HOW ARE those batteries made, anyway?

ODA315. I got this informa... (Below threshold)

ODA315. I got this information from the Michael Crichton novel, "State of Fear," and we've loaned that book out so I can't give you his sources, so take this for what it's worth: The elements for those batteries are mined in Canada, at a site that's so toxic and dead that it's used for training and testing HazMat gear and personnel. Then, it's transported to the West Coast where it's shipped to China to be refined because it's too dangerous and dirty to do it here. Then it's transported to Japan to be turned into batteries. Then the batteries are either put into Japanese cars or they're shipped to the U.S.A. to be put into our cars. So much for "clean" electric and hybrid cars.

BTW, "State of Fear" is a great mystery novel with a lot of good information about the current environmental issues.

Every time government manda... (Below threshold)
Weegie:

Every time government mandated CAFE standards is mentioned, I cannot help but consider just how it is a prime example of the law of unintended consequences.

The government, acting under some secret article of the Constitution (apparently), decided to mandate fuel mileage requirements, with higher requirements for cars than trucks.

This eliminated the large cars and station wagons, and CREATED the huge SUV and Light Truck and minivan market we've had for the past 20 years. Because people still needed to haul stuff, and haul people, they had to move to larger, less fuel-efficient vehicles than their old vehicles.

Thus, CAFE made the overall fuel mileage of vehicles on the road WORSE than it was previously. Gas consumption increased. And politicians and environmentalists and other assorted folks scratched their heads and wondered what happened.

Unintended consequences are typical from feel-good, well-intentioned but poorly thought-out plans. Results, not intentions, are what matters.

Weegie, not to mention the ... (Below threshold)
SPQR:

Weegie, not to mention the large number of auto accident fatalities attributable to CAFE.

Makes me breakout singing P... (Below threshold)
GoCougs:

Makes me breakout singing Paul Shanklin's "In a Yugo"

One of the things I most... (Below threshold)
Brian:

One of the things I most love is when I make a pronouncement about something, and then events conspire to provide me with a ready-made example of why I'm right.

Good for you, Jay. But when they prove you wrong, not so much.

Back in 2005 I was driving ... (Below threshold)
Mac Lorry:

Back in 2005 I was driving a vehicle that got 14 MPG overall. I now drive a vehicle that gets 22 MPG overall. Here's an interesting point. I saved more gas by going from 14 to 22 MPG than I would going from 22 to 44 MPG. Doesn't sound right, but it's simple math. At 14 MPG I would use 35.714 gallons to drive 500 miles, but at 22 MPG I would use just 22.727 gallons; which 12.987 gallons less; a 36.36% savings. At 44 MPG it would take just 11.364 gallons to go 500 miles, and while that's a 50% savings over 22 MPG, it's only 11.364 gallons less compared to the 12.987 gallons savings between 14 and 22 MPG. In fact, I would need to get over 51 MPG to save that 12.987 gallons.

The point is that you don't need to buy a sub compact to save a lot of gas, you just need to get out of the large SUV /pickup for your daily commute. Sure, if you need to tow over 3500 lbs, then you'll need a big vehicle, but think about what it's going to cost you when gas is $7 a gallon in two or three years. I drive a Toyota RAV4 with the 269 hp V6 4x4. It gets 22 MPG overall according to Consumer Reports, which is just 1 MPG less than the 4 cylinder model. It tows up to 3500 lbs and does 0 to 60 is 6.7 seconds using the old-man style of launch. It gets better mileage than many cars, yet hauls a lot, tows a fair bit, and blows the doors off many cars, SUVs and nearly all pickups. Got to have some fun, too.

Good points Mac.Be... (Below threshold)
ODA315:

Good points Mac.

Before we see $7 gas however a lot of politicians will be out of a job. And we know that'll never happen.

When the Democrats suggest ... (Below threshold)
SPQR:

When the Democrats suggest real measures to increase refinery capacity, then I'll believe that they care about gas prices. Until that, we know that they are just full of BS.

Mac, your example works unl... (Below threshold)
Jamie:

Mac, your example works unless you have a family of eight that likes to take occasional vacations. By the time we get something large enough to haul us and still have luggage capacity that will hold more than a golf cart, we're pretty much stuck with what we have now...a Ford Excursion.

What irritates me is the feeling from the government that they simply MUST curtail the sales of the Evil Large Vehicles by adding additional tax to their sales price, or institute fuel economy requirements that make it impossible (or economically not practical) for the automakers to offer such a large vehicle. Those of us who drive full-size SUVs do so largely out of necessity in today's gas prices.




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