07 June 2008

Popular policies are not necessarily effective

From Charles Krauthammer, via Greg Mankiw:

You want more fuel-efficient cars? Don't regulate. Don't mandate. Don't scold. Don't appeal to the better angels of our nature. Do one thing: Hike the cost of gas until you find the price point.

Unfortunately, instead of hiking the price ourselves by means of a gasoline tax that could be instantly refunded to the American people in the form of lower payroll taxes, we let the Saudis, Venezuelans, Russians and Iranians do the taxing for us -- and pocket the money that the tax would have recycled back to the American worker.

A gas tax won't happen, but gas prices are more effective at spurring changes in the auto industry than any government regulations ever could:

[Last December's new fuel efficiency standards] involved, as always, dozens of regulations, loopholes and throws at a dartboard. And we already knew from past history what the fleet average number does. When oil is cheap and everybody wants a gas guzzler, fuel efficiency standards force manufacturers to make cars that nobody wants to buy. When gas prices go through the roof, this agent of inefficiency becomes an utter redundancy.

At $4 a gallon, the fleet composition is changing spontaneously and overnight, not over the 13 years mandated by Congress. (Even Stalin had the modesty to restrict himself to five-year plans.) Just Tuesday, GM announced that it would shutter four SUV and truck plants, add a third shift to its compact and midsize sedan plants in Ohio and Michigan, and green light for 2010 the Chevy Volt, an electric hybrid.

Now, isn't that funny?

1 comment:

  1. High gas prices encourage and enable producers all over the world to look for and develop additional supplies. High gas taxes encourage the government to find new ways to spend money.

    The question is, which is to be preferred.

    ReplyDelete