With President Obama’s proposed upgrade of car fuel efficiency standards (government-mandated standards, of course), I have a few bold predictions to make:
1. The administration’s estimate of an average increase of $1,400 per vehicle is far too low. A more accurate estimate would be an extra $4,000 or $5,000, what one would pay extra (at least) for a hybrid car.
2. Materials in cars would move increasingly towards polymers (plastics) and aluminum and away from steel and cast iron. Conventional illumination systems will be increasingly replaced by high-end, expensive LED systems. This could be good news for some small companies in the South, West, and Northeast, but will probably hurt even more the rust belt, which still has a fair share of iron and steel plants which primarily serve the auto industry by producing low-cost, high-quality, ultra-reliable parts. They will be driven out in a hurry. Too swift a movement towards these lighter materials will likely mean a safety problem and almost certainly a quality compromise.
3. The value of some used cars will increase as their demand will as well. A reliable gas guzzling vehicle purchased in 2014 may depreciate lower than one purchased in 2002.
Let it always be remembered that, as Henry Hazlitt would say, a good economist looks for all effects of a certain policy, and a poor economist looks at a narrow window of scope, ignoring the complete picture. Sadly we have neglected wisdom and we continually look to our tunnel-vision minded political machine to set our course for us.
Predictions of higher cost were made when refrigerator efficiency standards were introduced in the 1970s. At least in that case, the predictions were wrong.
Socialist-brother-in-law,
Thanks for your comment.
It could also be said in opposition to my post that the original CAFE standards had a relatively small effect on vehicle price and perhaps quality (though the Ford Pinto was a famous safety hazard built around this time).