Mix together surging gasoline prices, a conflict in the Middle East, and a presidential election year, and what do you get? Given the sorry state of economic education among our political elites, you are likely to find bad energy – policy proposals and an increased willingness to intervene in the very market forces that are necessary to promote trade, peace, and wealth creation.

This likelihood is exemplified in the recent calls for raising the Corporate Average Fuel Economy (CAFE) standards. These 1970sera regulations require the average car produced by an automobile manufacturer to meet a prescribed fuel-efficiency target in terms of miles per gallon.

They have always been popular with the left. Presidential candidate John F. Kerry’s web site calls for increasing “our fuel economy standards to 36 miles per gallon by 2 0 1 5 . ” An Episcopal Church Public Policy Network “White Paper” argues that the “biggest single step we can take to save oil and curb global warming is to raise [CAFE] standards for both cars and light trucks.” Newspapers from the Seattle Times to the Birmingham News have editorialized this year in favor of raising CAFE standards.

This knee-jerk proposal becomes popular every time gas prices spike at the pump, and we couldn’t disagree more. Not only would raising CAFE requirements restrict individual choice and weaken the property rights of manufacturers, but the costs to drivers almost certainly outweigh the benefits, on average. This means that the cure would be worse than the disease.

CAFE standards were raised significantly from 1975 to 1984, a period when we experienced much higher gasoline prices, in real terms, than we are experiencing now. In 1980, for example, the price of gasoline hit $ 1 . 5 0 per gallon in Blacksburg, Virginia. Adjusted for transportation-related inflation from February 1980 to February 2 0 0 4 , the current price per gallon of that gasoline would be approximately $2.98. People responded to that dramatic price increase by changing their behavior in ways that reduced the overall cost of driving: they carpooled more; they planned their shopping more carefully to reduce the number of driving trips taken; and they bought more fuelefficient cars. Oh, and by the way, the federal government raised CAFE requirements.

The high price of gasoline not only motivated changes in driver behavior, which led to decreased demand for gasoline; it also stimulated substantial new oil exploration and development of new reserves. The combination of reduced demand and increased supply had a predictable, if not inevitable, effect on gasoline prices. Starting in the mid-1980s, gasoline prices started coming down. . . and down . . . and down. Just three years ago, we were paying well under a dollar per gallon in many parts of the country.

Much more than CAFE regulations caused such a welcome fall in prices. In fact, the regulations themselves can have the unintended effect of increasing gasoline demand if they encourage drivers to spend additional time on the road in more fuel-efficient cars than they would in less fuel-efficient cars. If this effect results in no net change in gasoline consumption, then CAFE is inherently selfdefeating in its stated purpose.

Despite this possibility, the price of gasoline tumbled in the 1990s because of market forces, not because of CAFE standards (which, after all, have been set at 2 7 .5 miles per gallon for the new passenger car fleet since 1 9 9 0 ) . This result is hardly surprising. Price signals dispersed among millions of independent economic actors play a much more significant role in affecting gasoline prices than commands from a few bureaucrats holed up in Washington, D.C.

Such economic history suggests that gas prices have both risen and fallen in spite of CAFE standards. Indeed, there are compelling reasons to believe that such standards only intensify the recent increase in the real cost of driving for motorists. Technologically, automobile manufacturers can meet higher standards in two principal ways. They can improve engine processing of the fuel and reduce the weight of vehicles (since a gallon of gasoline can push a lighter vehicle farther than a heavier vehicle). Automobile firms, which have paid over a half a billion dollars since 1983 in CAFE related civil fines, have a strong incentive to implement some combination of these solutions. Historically, they did so by lightening the vehicles, replacing steel with aluminum. Because steel construction offers more protection, lightening the vehicles dramatically increased the safety risk and financial costs of being in an accident. (A 2 0 0 1 study done by the Transportation Research Board, an “independent adviser to the federal government,” concluded that lighter and smaller cars were likely responsible for 1 , 3 0 0 – 2 , 6 00 additional highway deaths in 1 9 9 3 . 1)

Air Bags Required

In response to this unintended consequence of government intervention in the market, air bags were required in the newcar fleet, another costly result of CAFE because federal safety rules do not allow for air bags to be reused. “Add the cost of labor, more than $ 1 , 0 0 0 for each air bag, and even more for the sensors, and the result is a totaled car,” writes Eric Evarts in the Christian Science Monitor.2 Insurance-premium inflation, anyone?

Two points should be remembered the next time we read about traffic deaths on our highways. First, the lighter and less safe fleet of cars, thanks to CAFE, distorts the automobile market by causing some individuals to keep older and heavier cars longer than they otherwise would, and by increasing the demand for sports-utility vehicles, which escape such regulations. In the absence of more stringent mileage standards, at least some of these individuals would gladly pay more for gasoline (per year) in order to drive less fuel-efficient, but safer cars. There simply is no defensible reason to deny those people the opportunity to make the relevant implicit tradeoffs themselves, rather than trusting that the supposed savings in gasoline prices would, in fact, exceed the benefit from safer vehicles.

Second, CAFE standards inevitably lead to significantly higher vehicle costs and higher risk costs with little evidence that they are responsible, by themselves, for lowering gasoline prices. This implies that the social costs of raising CAFE standards substantially exceed the social benefits. As the saying goes, the road to hell is paved with good intentions. We’d like to see lower gasoline prices. Thanks to the laws of supply and demand, the existence of higher than – average prices virtually guarantees that prices will come down. Raising CAFE standards hinders this process and puts us on a road we don’t want to be driving.

1. “Effectiveness and Impact of Corporate Average Fuel Economy (CAFE) Standards.” See Finding 2 at http://books.nap.edu/books/0309076013/html/3.html#pagetop.
2. “New Cars Are Getting Too Expensive to Fix,” Christian Science Monitor, April 19, 2004.

Edison’s words may have been true in the 1800s. Today, however, we have plenty of rules, thanks to the U.S. Congress. Some are so bizarre that you have to question the judgment of those who come up with them. One rule in particular is probably causing Edison to spin in his grave. His most famous invention, the incandescent light bulb, a mainstay in every American household for over a hundred years, has been banned by an act of Congress and will be replaced with the government-approved compact fluorescent light (CFL) bulb.

U.S. Rep. Jane Harman announced in a 2007 news release that her provision “bans Thomas Edison’s favorite oldie, the 100-Watt incandescent, by 2012, and will phase out inefficient light bulbs by 2014. By 2020, it requires that all light bulbs be 300 percent more efficient than today’s incandescents.”

Unfortunately, the federal government’s ban on products that happen to work just fine is nothing new. In writing about government-mandated products, I have noticed remarkable similarities in each case. They proceed through four phases and the light-bulb mandate is no exception.

Phase 1: Bureaucrats, “consumer advocates,” and environmentalists trumpet how wonderful the new product is. The extensive hoopla surrounding it can be boiled down to just two claims: big savings for the consumer and benefits to the environment.

The Department of Energy (DOE) and the Environmental Protection Agency (EPA) began to promote CFLs in 1999 with their “Change a Light, Change the World” program. The DOE’s and EPA’s promotional (lobbying?) efforts were directed at members of Congress and governors, plus state and local officials, to encourage their constituents to participate. In 2006 then-Secretary of Energy Samuel Bodman said: “Here’s a simple step we can take to preserve energy resources, save money and help the environment.” This is the typical approach that the government uses to influence the marketplace. The government never states that its chosen prod-uct is better.

The “big savings” never refers to the retail price. This is because the government-endorsed products are always more expensive than the consumer-endorsed alternatives. A 75-watt incandescent bulb at my local Kroger store costs 22 cents. The 20-watt CFL (advertized as equivalent to the 75-watt bulb) costs $5.49–25 times more expensive. A three-way incandescent bulb (50-100-150 watts) costs $1.25. A three-way CFL (12-23-32 watts) costs $13.12. That’s ten-and-a-half times more expensive. So when the government, environmentalists, and consumer advocates talk about big savings, they are obviously not talking about the upfront cost. They mean the operating cost over the life of the product. CFLs are advertised to last up to ten times longer than the incandescent bulb and use 75 percent less energy.

In the not-too-distant past, patriotism was exploited by the government to elicit a desired response from its citizens. Today, it is environmentalism. This has become our de facto state religion. When the government says that we need to do something because it is good for the environment, we are expected to take it on faith. We are not to question the government’s motives or logic for taking away our freedom of choice, but are expected to feel good about forgoing our selfish consumer desires because there is no higher calling in this country than saving the environment.

Rejected by Consumers

Phase 2: Consumers weigh the advantages and disadvantages of this wonderful product and decide that it is not really that wonderful after all.

CFLs have been on the market for some time, but so far consumers have not been impressed. Besides being expensive and strange looking, the light quality doesn’t seem to please people. They are not as good for reading as incandescent bulbs are, for example. Many also complain that the bulbs flicker and buzz. Dimming the intensity of CFLs also poses a problem. It would appear that consumers have a very clear choice: They can pay more for the new inferior government bulb or pay far less for a superior existing product. This might help to explain why CFLs made up only 5 percent of the light-bulb market last year, according to H. Sterling Burnett of the National Center for Policy Analysis.

I have been trying one of these bulbs above the sink in our kitchen. When I get up in the morning to make coffee, I flip the switch—but the light doesn’t really turn on. It starts off with a faint glow that gradually brightens for two to three minutes until fully illuminated. To get the lighting I want I must also turn on the light over the stove (one of those bad incandescent bulbs) because it brightens immediately. So now I am using two lights instead of one. Because turning the CFL on and off is so annoying, it is the one light in the house that we tend to leave on all the time. Why not? It’s so cheap! This situation is analogous to what happened when the government imposed CAFE fuel-efficiency standards: People drove more.

Mandated by Government

Phase 3: Hating to have their recommendations ignored by the ignoramus class, the miffed elitist class takes steps to mandate their beloved product.

Here is a question that never gets a direct or honest answer: If these economical and environment-friendly products are so wonderful, why is it necessary to outlaw competing products? The unsaid answer appears to be: The government, consumer advocates, and environmentalists know what’s best for the consumer.

As Ed Feulner, president of the Heritage Foundation, put it, “It’s only inferior or unnecessary products that require congressional intervention to survive. Useful or innovative products thrive on their own.”

When Rep. Harman introduced the bipartisan ban on the Edison light bulb, she said, “Only 10 percent of the power used by today’s incandescent bulbs is emitted as light, while the other 90 percent is released as heat.” Let me see if I have this right. Here in Michigan, where we have long, cold winters, the incandescent light bulbs in our family room actually help keep my wife, daughter, and me warm while we watch TV and read. Since the lights in the rest of the house (except for the light over the sink) are all off, why is this considered a problem? In the summer, when it gets dark later, we hardly use the lights. So I fail to see why this issue demands heavy-handed congressional intervention.

The Energy Independence and Security Act, signed by President Bush in 2007, contained the incandescent ban, but it also included a Consumer Awareness Program, authorizing $40 million to help consumers make energy-efficient lighting “choices.” Thus as the government takes away our freedom of choice, it also spends our money to convince us that we really have a choice.

Bad Product

Phase 4: It becomes clear that the consumer’s reluctance was justified. The product is in fact bad. But it doesn’t matter because the old product that worked has been outlawed.

The DOE guidelines for CFLs suggest that they be left on for at least 15 minutes after they are turned on, prompting Andrew Ferguson of the Weekly Standard to comment, “Odd, isn’t it—an energy-saving device that you’re not supposed to turn off?” It turns out that the lifespan of a CFL depends on how many times you turn it on and off. Failure to keep the light on causes the bulbs to burn out just as fast as the Edison bulbs. There go those big savings. So try to get in the habit of not turning off the lights after using the bathroom, a closet, or the laundry room. However, plan to come back 15 minutes later to turn off the light.

And while CFLs that are left on may last ten times longer than incandescent lights, no one is saying that they will fully perform for that long. A Department of Energy study found that after 40 percent of the advertised service life, a quarter of the CFLs started to become dim bulbs. If you don’t mind having dim bulbs for 60 percent of the service life, then CFLs should make you happy.

While these mandated lights may be great for the environment, they are not so great for humans. In some people they trigger headaches or even migraines because of the nearly imperceptible flickering. The BBC reported that the bulbs can also increase the risk of seizures in people with epilepsy. According to the Winnipeg Free Press, the United Kingdom’s Health Protection Agency recommends that people be no closer than about a foot from these lights for more than an hour a day. The ultraviolet radiation emitted by CFLs is like direct sunlight on bare skin. Thus the government is mandating that we all have miniature sun lamps throughout our homes.

But maybe the government light bulb is not really good for the environment after all. It turns out that the each CFL contains five to ten milligrams of mercury. Mercury is one of the most toxic substances on earth; it can cause serious health problems, including nerve and kidney damage. The mandate will result in millions or billions of CFLs ending up in landfills where the mercury will leach out to contaminate the soil and groundwater.

So how do CFLs fit with the EPA’s recommendation that we purchase mercury-free products? It explains that the amount of mercury in the bulbs is much smaller than the amount in old-fashioned thermometers (which are disappearing from households) and watch batteries. Both statements may be true; however, I have never had a thermometer or watch battery explode, shatter, or break the way a light bulb does. It was also my choice to have, or not to have, a mercury-filled thermometer or watch battery. The EPA’s final defense is that the health and environmental risks of CFLs are insignificant compared to the risk presented by the mercury put out by coal-burning power plants.

So what happens if a CFL next to my daughter’s bed breaks? According to the EPA guidelines, I am to: 1) open the windows and evacuate the room for 15 minutes; 2) shut off the heating or air-conditioning system; 3) carefully scoop up the glass using stiff paper and place it in a glass jar or sealable plastic bag; 4) after vacuuming, wipe the canister and put the bag or debris in a sealed plastic bag; and 5) throw away clothing or bedding that comes in contact with the broken glass or the mercury-containing powder. I must not wash contaminated clothing or bedding because mercury fragments may also contaminate the washing machine or pollute the sewage.

Has this convinced you that the health and environmental risks of CFLs are minor?

As a result of the Energy Independence and Security Act, we will be forced to buy new light bulbs for every room in the house that are more expensive, of lower quality, dangerous to our health, and bad for the environment. Given this government mandate, the consumer has three options. The first is to go out and buy up all the old-fashioned Edison bulbs before they become illegal. The second option is to try to get a family discount on hazmat suits. The final option is to just say no to dim bulbs. U.S. Rep. Michele Bachmann has proposed the Light Bulb Freedom of Choice Act. She is facing extensive opposition from the green lobby, big government, and consumer groups. Sadly, fighting for freedom in this country has become an uphill battle.

Start with the Corporate Average Fuel Economy (CAFE) law, which requires each auto producer in the U.S. market to make fleets that average at least 27.5 miles per gallon for cars and at least 20.7 mpg for trucks. (Former President Bush and Congress increased that to 35 mpg by 2020, with no lower standard for light trucks.) That law had the unintended but totally predictable consequence of making cars less safe. The reason is that one relatively cheap way to raise fuel economy is to make cars lighter, and the lighter they are, other things being equal, the more dangerous they are to their occupants. In 1989 two economists, Robert Crandall of the Brookings Institution and John Graham of Harvard University’s John F. Kennedy School, found that, adjusting for the downsizing of cars that would have occurred anyway, the CAFE laws would cause an extra 2,200 to 3,900 deaths over the life of a 1989-model-year car.

But the CAFE law is itself the result of another unintended consequence of government policy, namely price controls on oil and gasoline. President Nixon’s economy-wide wage and price controls, imposed in 1971, did not cause much difficulty at first. But when the Organization of Petroleum Exporting Countries (OPEC) raised the world price of oil from about $3 a barrel to about $11 over a few months in late 1973, Nixon’s price controllers refused to allow refiners to pass on the whole increase in the price of gasoline. The result was a massive shortage of gasoline, with long lines at the pump. Rather than remove the controls, Nixon had government officials start allocating the gasoline by various arbitrary criteria, a process the Ford and Carter administrations continued.

Government officials in the Ford administration and in Congress noticed that American car buyers were not buying as many high-fuel-economy cars as these officials thought they should. In other words, Americans were responding to the artificially low price of gasoline by acting as if the price of gasoline were low! Gee, what a surprise. Of course, instead of removing the price controls, Congress and Ford decided to regulate the fuel economy of new cars—that’s how we got CAFE. Like all regulations, this one bred its own lobby, featuring Ralph Nader and Clarence Ditlow. They had been, until that time, advocates of car safety. But they wanted enforced fuel economy even more.

That’s not the end. One way the companies could meet their CAFE targets was by importing small, high-fuel-economy cars from their foreign production facilities. The United Auto Workers union noticed this and lobbied for—and achieved—separate standards. Auto companies then had to hit the standard with their domestic production and, separately, with their imports. That caused the companies to produce more small cars at home rather than import even successful cars from abroad. According to William Niskanen, the chief economist at Ford in the late 1970s, Ford dropped its Fiesta in the late 1970s not despite, but because of, the car’s potentially large market: Ford feared that its German-made Fiesta would “steal” sales from its U.S.-made Escort, thus lowering its domestic CAFE average.

Moreover, even the increase in the world price of oil engineered by OPEC in late 1973 was in part the unintended consequence of U.S. energy policy. Why? Because OPEC had been formed in response to President Eisenhower’s restrictions on oil imports. As economist Ben Zycher points out, in 1959 the U.S. government established the Mandatory Oil Import Quota Program (MOIP), which restricted the amount of imported crude oil and refined products allowed into the United States. It also gave preferential treatment to oil imports from Canada and Mexico. Two major growing sources of supply at the time were the Middle East and Venezuela. By reducing a major market for Middle Eastern and Venezuelan oil, the import-quota system drove down the demand for that oil, causing its price to fall in February 1959 and again in August 1960.

In September 1960 governments of four Persian Gulf countries—Iran, Iraq, Kuwait, and Saudi Arabia—facing discrimination against their oil, joined with Venezuela to form OPEC. Their goal was to get monopoly power to offset the monopsony power created by the U.S. oil import quota system and thus get higher prices. Although OPEC was at first relatively powerless, by 1973 the governments of eight other countries—Algeria, Ecuador, Gabon, Indonesia, Libya, Nigeria, Qatar, and the United Arab Emirates—had joined. In 1973, OPEC made its move.

From the CAFE to the Mess Tent

CAFE laws and other fuel-economy standards are not the only unintended consequences of U.S. price controls on oil and gasoline. One can even speculate reasonably that these price controls led to two major wars initiated by the U.S. government. The reason is that instead of blaming their government for lines at gas stations, Americans have tended to blame foreign governments—especially the government of Saudi Arabia, the leader of the OPEC cartel and its largest producer. In 1979 President Carter formed the Rapid Deployment Force to train for combat mainly in deserts. President Reagan kept this force and renamed it the U.S. Central Command.

Whatever Carter’s motives or understanding in forming this force, the hardwiring in Americans’ minds led them to associate gas lines with nasty Middle East governments rather than with the nasty U.S. government. That made them more willing than otherwise to support intervention in Middle Eastern affairs to secure the continued flow of oil. Thus when Henry Kissinger claimed in August 1990 that Saddam Hussein’s invasion of Kuwait, if left unopposed, “would cause a world-wide economic crisis,” many Americans believed him. In a Wall Street Journal article that month, I showed that, in fact, the absolute worst harm Hussein could do to the U.S. economy, even if he grabbed Saudi Arabia and the United Arab Emirates, was a loss of less than half of 1 percent of GDP annually. But because so many Americans feared the return of gas lines, they were more open than otherwise to a U.S. attack on Iraq.

Later, in 2003, the U.S. government still had the military capability to invade Iraq. The stated issue this time was Saddam Hussein’s alleged weapons of mass destruction. Still, the fact that the U.S. government had the capability to attack Iraq was due in part to Carter’s buildup of the Rapid Deployment Force.

As poet Robert Burns might say, “Oh what a tangled—and tragic—web government weaves when first it practices to intervene.”

As happens so often, the results of the fuel-efficiency program were opposite of the stated objectives. By reducing the per-mile cost of driving, it became economical to drive more. Forget carpooling and public transportation. The significant savings in MPG (114 percent improvement for cars and 56 percent improvement for light trucks) were more than offset by an increase in the per capita miles driven (through more leisure driving and living farther away from the workplace). So instead of seeing a drop in oil consumption, there was a significant increase. In 1975 U.S. consumption of oil was 14.4 million barrels per day. Today, we consume 18.7 million barrels per day. Given this revelation, it should not come as a surprise that oil imports did not decrease as predicted but increased. In 1975, before CAFE, we imported 37 percent of our petroleum requirements. According to the government’s Monthly Energy Review of July 2005, with CAFE we now import 64 percent. CAFE neither reduced America ‘s use of foreign oil nor lowered our consumption of gasoline. 

Even if the masses had done what the elite class wanted (that is, drive less), it is unlikely the results would have been much better. Conventional wisdom assumes that most of a barrel of petroleum becomes gasoline for automobiles. Actually, gasoline accounts for less than half (44 percent) of the petroleum end-products. Some of the other end-products include: petrochemicals (such as plastics), jet fuel, diesel fuel, kerosene, propane, and home heating oil. 

When the CAFE standards took effect in 1978, the initial impact was benign. Because of the high gas prices, consumers already strongly preferred high-mileage cars. There was no need for a mandate because consumers and the auto industry were responding to market conditions. In 1981 prices peaked at an inflation-adjusted $3.07 a gallon. After that, real gas prices started to plummet. By 1986 they had fallen to the lowest levels in 30 years. As a result, American consumers were abandoning the small cars for their true love: Big Cars. Unfortunately, Phase II of CAFE was just kicking in. The federal government was now pulling the auto industry and the consumer in opposite directions. By law the auto industry would be punished if it provided products that the consumer wanted. The industry had no choice but to pursue the following suicidal strategy: Overcharge for the big cars consumers demanded in order to restrict sales, and give away the small cars that consumers didn’t want in order to encourage sales. 

Unfortunately, consumers responded to this shell game in a way that neither the government nor the auto industry wanted. They stopped buying cars. The large-car market has effectively been replaced by pickup trucks, SUVs, and minivans. The light-truck market, which is not subject to the same CAFE restrictions as cars, has gone from 28 percent of the market in 1987 to over 55 percent today. This consumer rebellion also resulted in the following CAFE irony: The fuel-economy average for all vehicles dropped from 26.2 MPG in 1987 to the 24.4 MPG today. 

It would be hard to find a more anti-consumer, anti-business, anti-jobs, or anti-American piece of legislation. The CAFE laws forced the Big Three auto industry to unilaterally surrender its strong suit, the large-car market, and go head to head against the small-car strong suit of the Japanese manufacturers. This was no contest. In 2004 the top four selling cars were are all Japanese: Toyota Camry, Honda Accord, Toyota Corolla, and Honda Civic. 

To make compliance even more difficult, each of the Big Three American automobile companies actually have to meet two sets of CAFE standards, one for domestically produced cars and one for foreign-made cars. In other words, the U.S. companies could not use their high-MPG foreign-produced cars to offset  low-MPG domestic cars. Since the large cars were more likely to be produced in the United States , the domestic-fleet target of 27.5 MPG was all but unreachable. To avoid fines for producing cars that the consumer wanted, the auto industry had four options: 1) downsize the large cars, 2) stop production of large cars, 3) move large-car production overseas, or 4) make the domestic large cars “foreign” by outsourcing at least 25 percent of the parts. If all this seems insane, that’s because it is. 

Besides being ignorant of economics, our elite class does not know much about engineering. They assume that the auto manufacturers are deliberately hiding the technological silver bullet that will enable cars to get phenomenal gas mileage. While a few known engineering changes could make marginal improvements, the only proven way to make substantial gains in miles-per-gallon efficiency is to reduce the weight of cars. This is accomplished by both making the cars smaller and by replacing steel parts with plastic parts. The average weight of new cars has dropped by an average of 1,000 pounds since CAFE became law. While lighter cars get significantly better gas mileage than heavier cars do, this comes with a price. There is an unavoidable tradeoff between better mileage and safety. The following is not rocket science, just Physics 101: Lightweight cars are less able than heavyweight cars to absorb the impact associated with a crash. In the late ’90s the Geo Metro was able to get 44 MPG. According to the EPA, this was one of the most fuel-efficient cars in America . The Geo Metro was also ranked by the Insurance Institute for Highway Safety as one of the most dangerous cars in America . It had a death rate double that of the overall car average. 

Deadly Standards 

As Robert Crandall of the Brookings Institution and John Graham of the Harvard School of Public Health wrote in the Journal of Law and Economics in 1989: “CAFE will be responsible for several thousand additional fatalities over the life of each model-year’s cars. We conclude that the real social cost of government-mandated fuel economy is much greater than is commonly believed.” They went on to state: “We estimate that these 1989 model year cars will be responsible for 2,200-3,900 additional fatalities over the next ten years because of CAFE.” While Crandall and Graham looked only at the 1989 model cars, CAFE-induced fatalities apply to every model year car since 1978. 

Echoing a similar conclusion, in 2002 the National Academy of Science estimated that CAFE was responsible for between 1,300 and 2,600 fatalities and 13,000 to 26,000 incapacitating injuries in 1993. Based on data from the National Highway Traffic Safety Administration and the Insurance Institute for Highway Safety (IIHS), USA Today reported on July 2, 1999 (based on data through 1998) that 46,000 people had died needlessly since the CAFE legislation became law. The article also stated: “Small cars comprise 18 percent of the vehicles on the road. . . . Yet they accounted for 37 percent of the vehicle deaths in 1997.” Given that the congressionally mandated killing and maiming has been going on another seven years, it is probably time to revise the total carnage figure to around 60,000 fatalities. 

It has been 28 years since CAFE became law. A case could be made that this was (and continues to be) the worst piece of legislation ever passed by Congress. Contrary to grandiose predictions, it did not reduce oil consumption and it did not decrease our dependency on uncertain foreign sources of oil. It did, however, result in 60,000 deaths and hundreds of thousands of serious injuries. And it has all but destroyed America ‘s Big Three auto companies. Given the damage done, CAFE should be scrapped. Any pending CAFE legislation should be permanently tabled as well. 

Micromanaging the automobile industry through government centralized planning has been a colossal failure. It is time to let the marketplace create jobs, save lives, and efficiently allocate resources. The automakers should no longer be punished for producing products that consumers want. Consumers are fully capable of making rational decisions about cost, safety, fuel efficiency (hybrid and non-hybrid), comfort, appearance, and size without government mandates. They need no help from politicians, bureaucrats, consumer advocates, environmentalists, or media pundits. If a family wants to buy a safe vehicle big enough to transport grandma and all the kids, why is this controversial? It is time to restore freedom of choice in the automobile market.

Unfortunately, in an October 4, 2005, column titled “The Solve-Everything Tax” Tierney buys into a laundry list of economic and scientific fallacies as justification for a new 50-cent-per-gallon gasoline tax.

He opens by saying,“I have a modest proposal to fight global warming, save energy, cut air pollution, ease traffic congestion, reduce highway fatalities and, while we’re at it, reform Social Security.” But in fact, Tierney’s “Solve Everything Tax” would solve nothing and would causes problems of its own. Let’s take his claims one at a time.

Fight global warming. In a 1998 Geographical Research Letter article Thomas Wigley, a scientist who accepts the alarmist vision of global warming, concluded that if the Kyoto Protocol were implemented with 100 percent compliance the result would be global average temperatures in 50 years that are an undetectable 0.126 degrees Fahrenheit cooler than they otherwise would be. This result has gone unchallenged. Even if one accepts the alarmist position that global warming is primarily human induced and that its effects will be dramatic, extensive, and harmful, a 50-cent-per-gallon gasoline tax will do nothing to alleviate the problem.

Save Energy. It is not the role of government to tell people which productive inputs they should economize on and which they should use more of. Market prices reflect relative scarcities, and people will make tradeoffs in their lives and productive activities accordingly. For Tierney to suggest that he or policymakers know better what resources should be conserved invokes what Hayek called a “pretense of knowledge”and substitutes the decisions of central planners for freely choosing individuals.

Cut air pollution. Assuming that Tierney is referring to ground-level ozone (smog), the primary pollution “problem” still attributed to cars, then this tax is likely to accomplish little. Nationwide, ground-level ozone has been in steady decline for many years and this is likely to continue. Older, more-polluting cars are being replaced by newer, cleaner cars, and in the next few years more stringent federal regulations are coming on line. Leaving aside arguments that both the federal ozone standard and these new rules are overkill, if nothing more is done, most if not all of the country will be in compliance with this standard within the next several years. Tierney doesn’t explain why a permanent tax increase on gasoline is necessary to attack what is at most a short-run problem.

Ease traffic congestion. Congestion is experienced primarily during morning and evening rush hours. Commuting to work is probably the most important use that people make of their cars. Economic analysis suggests that the higher prices brought about by a new 50-cent tax—which will translate into less than a 50-cent price increase at the pump—will get people to economize on the least, not the most, important uses of their car. In other words, people are most likely to decide to go to restaurants or movie theaters that are closer to their homes, or take vacations that do not involve quite as long a drive. None of this will have an effect on traffic congestion during rush hour.

Reduce highway fatalities. To the extent that this tax encourages the purchase of lighter, more fuel-efficient cars it will actually increase highway fatalities. This has been the well-documented result of federal Corporate Average Fuel Economy (CAFE) standards.

Reform Social Security. For Tierney this is the clincher. It is what ensures that his gas tax is indeed the “solve everything tax.” The idea is that the revenue from the gas tax would fund private accounts for Social Security so, as Tierney puts it, “at least they’ll get their money back,” referring to purchasers of gasoline. The idea that people who pay the gas tax will “get their money back” in the form of a private retirement account is based on several false assumptions. First it assumes that these accounts will somehow be set up in proportion to the amount of gas tax that people pay. If this is not the case, then the whole program would be nothing but a coercive wealth transfer from those who pay relatively more in taxes to those who receive relatively more in “retirement account money.” But even if Americans were given retirement accounts that exactly equaled the amount paid in gas taxes, they would still be made worse off. This is because without the tax, the money can be used at any time for any purpose—to pay the rent, buy new clothes, and make car payments, and so on. But money received as a retirement account would be restricted to retirement use. Hence from the perspective of economics that money is less valuable to the taxpayer than the money paid in taxes. This takes into account that the money in the account would accumulate interest. If the gasoline taxpayer preferred to put this money away in an IRA or other retirement account and have it accumulate interest, he would have that option without the “help” (coercion) of Tierney’s gas tax.

The idea of funding private accounts for Social Security with a tax increase is certainly not a novel idea. But according to Tierney,this isn’t just any tax increase. This is a tax increase that would be good for society even if Social Security were not the target of its booty.

Unrealistic Assumptions

Finally, to put some “rigor” into his proposal, Tierney turns to a study in the American Economic Review purporting to show that the gas tax “should increase by 60 cents per gallon to compensate for the congestion, pollution and other costs that drivers impose on society.” Besides the fact that none of these revenues would be used to “compensate” anyone for anything, to arrive at such a conclusion the authors of this study had to make assumptions about market prices and what they represent that have no relationship to the real world. When assessing the tax calculations made in these kinds of studies, Nobel laureate James Buchanan concluded in his book Cost and Choice, “[T]he analyst has no benchmark from which plausible estimates can be made.” Ultimately, these calculations require the same information that an all-knowing economic central planner would need to efficiently plan an entire economy. This is why “pollution taxes” advocated by many economists as a “market based” policy are actually a “stealth” form of socialism. Ultimately, taxes of this sort, while derived in an air of rigor and mathematical elegance, are arbitrary and meaningless in terms of their stated goal—increasing economic efficiency and social welfare.

In reality, Tierney’s tax is nothing special. Like a typical “sin tax,” its intentions are paternalistic. And like all other taxes, it coercively transfers wealth and distorts economic decision-making.

First sin, then treason, and finally, reckless idiocy. For owners of sports utility vehicles (SUVs), that pretty much sums up the last holiday season. They went into Thanksgiving under fire from the “What Would Jesus Drive?” campaign. Then the New Year started with Arianna Huffington’s charge that they were aiding Osama bin Laden. To top it off, in late January the head of the National Highway Traffic Safety Administration (NHTSA) declared that SUVs were simply too deadly for his children.

The media, of course, ate it up. In part, that was a healthy sign that there was nothing really important to report. But beyond their amusement value, these campaigns had some very real objectives: raising the federal government’s fuel-economy standards, encouraging congressional legislation, and sticking some new voodoo pins into the demonized doll of automobility.

Attacks on the SUV are nothing new. Prior to last fall, environmentalist organizations regularly decried their gas-guzzling nature and their contribution to the alleged threat of global warming. Self-proclaimed consumer-safety groups claimed they were dangerous to those who rode in them and to those who rode near them, citing rollovers and the Firestone-tire fiasco. Photos of subcompacts demolished by intact SUVs became a news favorite, despite the relative rarity of such occurrences. In September a book by New York Times reporter Keith Bradsher, High and Mighty, labeled them “the world’s most dangerous vehicles.”

But the attacks seemed to change in November, when the “What Would Jesus Drive?” (WWJD) campaign hit the big time. The Evangelical Environmental Network brought a convoy of electric hybrid cars to Detroit, where its spokesmen met with top Ford and GM executives to urge increased production of more fuel-efficient vehicles. The Network claimed that “the Risen Lord Jesus is concerned about the kinds of cars we drive because they affect his people and his creation.” The industry responded that it preferred to leave its purchasing decisions to consumers. That, apparently, was not a satisfactory answer.

The WWJD event was widely covered, though its most noteworthy impact was to stimulate jokes. But the campaign’s attempt to inject theology into the SUV debate created a curious paradox. Here were people concerned with issues of morality and ethics, and yet they were absolutely mum about the fact that the program they wanted to tighten had already been found lethal.

The program is CAFE, shorthand for Corporate Average Fuel Economy. CAFE was enacted in 1975 in response to the Middle East oil shocks and was aimed at increasing the fuel economy of new cars and trucks. NHTSA, a unit of the U.S. Department of Transportation, was authorized to establish a series of minimum mile-per-gallon standards that each car maker had to meet in terms of yearly vehicle sales. Not every car sold had to meet this standard; a company’s sales of large cars that were below the standard could be offset by sales of highly efficient small cars, and credits for exceeding the standard in one year could be applied to future production. The current CAFE standard is 27.5 mpg for passenger cars and 20.7 mpg for light trucks, a category that includes pickups, vans, and SUVs. On March 31, NHTSA announced that the light-truck standard, unchanged since model year 1996, would be raised to 22.2 mpg by 2007.

CAFE has been subject to a number of critiques. There’s considerable dispute over whether CAFE actually reduces fuel consumption. By forcing new technologies into vehicles quickly, CAFE raises new-car prices, encouraging many people to hold on to their older, less fuel-efficient cars longer. Moreover, when people have more fuel-efficient vehicles they tend to drive more, since each mile costs less in gasoline.

There’s also the old-fashioned notion that people should be able to buy the vehicles they want, and drive them as much as they want, without government interference. Unfortunately, this argument carries less and less weight in Washington.

CAFE Kills

But perhaps the most interesting critique is that CAFE kills people by causing vehicles to be “downsized.” Larger, heavier cars are less fuel efficient than similarly equipped smaller, lighter cars, but they also tend to be more crashworthy in practically every collision mode. They have more mass to absorb energy forces, more interior space in which their occupants can decelerate, and more momentum, which reduces the severity of their deceleration in accidents. As a result, occupant death rates for small cars are generally higher than those of large cars, sometimes by a factor of four or more.

It’s true that new technologies can improve both safety and fuel economy for small and large cars alike. Nonetheless, no matter what new technologies are developed, CAFE will still impose a blood-for-oil tradeoff. Take the most technologically advanced car imaginable, and then add a hundred pounds to it. Two things will happen—that new car will become less fuel efficient, and it will become crashworthier. In short, even with advanced technologies we still have to choose, at a certain point, between more safety and more fuel economy.

You might think that NHTSA, as an agency whose middle name is safety, would have been extra careful to publicize CAFE’s lethal effects. In fact, it did exactly the opposite, taking the position through most of the 1980s that CAFE had no real impact on safety.

The Competitive Enterprise Institute (CEI) and Consumer Alert sued NHTSA, and in 1992 they won a federal appellate-court ruling that NHTSA’s treatment of the CAFE-safety issue was so arbitrary as to be illegal. In the court’s words, NHTSA had used a combination of “fudged analysis,” “statistical legerdemain,” and “bureaucratic mumbo-jumbo” to duck the issue. The agency was ordered to reconsider its position.

NHTSA took over a year to come up with a new rationale for why CAFE was harmless. CEI and Consumer Alert sued again, and this time the agency won, though the court noted that it found NHTSA’s approach “troubling.” Given the high degree of deference that government agencies receive in court, that was a good indicator that NHTSA was still fudging things.

In 2001, however, any doubts about CAFE’s lethal effects should have been put to rest by a National Academy of Sciences study of the program.* The study concluded that CAFE’s downsizing effect probably contributed to between 1,300 and 2,600 traffic deaths annually. Given that CAFE has been in full force for more than a decade, that is one staggering sum.

The National Academy’s safety findings, however, were not widely reported. Instead, the press focused mostly on the study’s far more tentative conclusion that new technologies, if introduced carefully, would enable the auto industry to meet moderately higher CAFE standards without additional downsizing. In effect, CAFE advocates were able to spin the study as a “blueprint” for raising CAFE, and the public continued to remain uninformed about its human costs.

The “What Would Jesus Drive?” campaign did nothing to enlighten them. When it came to acknowledging CAFE’s risks, the WWJD organizers were no better than NHTSA. For all their talk about concern for God’s creation, they never even hinted that their demand for higher CAFE standards might put people at risk. To do so would have destroyed the moralistic nature of the campaign. While the safety issue had been ignored in the past by CAFE advocates, its treatment by the WWJD campaign reached a new level of dishonesty.

In early January 2003 the anti-SUV campaign embraced a new issue—national security. Erstwhile conservative celebrity Arianna Huffington and her Detroit Project released a series of television spots claiming that owning an SUV was tantamount to funding terrorism.

The ads had superb production values; no surprise, given the Hollywood crowd that was helping her. They were also nonsense—elitist nonsense, to be precise. Here we had a jet-setting celebrity criticizing the vehicles bought by people who had barely a fraction of her wealth. If she was concerned about our use of Middle East oil, then shouldn’t she be advocating opening up the Alaskan National Wildlife Refuge to oil drilling? If her concern was our use of any oil, then shouldn’t she set an example by taking a vow of petroleum abstinence, perhaps, eschewing oil-fueled limos and planes? And if Huffington was serious, then why focus on the types of vehicles we own rather than on the amount of driving we do?

The answer, of course, is that the SUV is so easy to demonize. SUV has come to stand for Scapegoat Utility Vehicle.

While Huffington’s campaign was new, her sentiments, in at least one sense, were not. Changes in mobility have often upset elites. In the early 1800s, when railroads first began to spread across Great Britain, the Duke of Wellington reportedly sneered that they would “only encourage the common people to move about needlessly.” Today the concern isn’t commoners in railroads, but commoners with four-wheel drive.

NHTSA Re-Enters the Fray

Several weeks after the launch of the Detroit Project, Jeffrey Runge, head of NHTSA, attacked SUVs as being incredibly unsafe, declaring that he wouldn’t let his daughter ride in one “if it was the last one on earth.” While Runge, a medical doctor, later backtracked at a congressional hearing, his latter remarks were dismissed by many as a bureaucrat’s buckling to White House pressure. The real story, supposedly, was that the dangers of SUVs had been acknowledged by the head of the nation’s traffic-safety agency, speaking from the heart.

But Dr. Runge, of all people, should have known that focusing on the rollover risk of the SUV misses the real point, which is overall vehicle safety. Because of their higher center of gravity, SUVs do have a higher rollover risk than cars, and some models may be especially bad. But the real measure of a vehicle’s safety is not how it performs in one particular crash mode, but how it does overall. Probably the best indicator of this is a vehicle’s occupant death rate, since that is based on all types of accidents represented according to their frequency. Occupant death rates may themselves need some adjusting, to reflect such things as differing driver demographics, but they nonetheless are a basic means by which to compare vehicles.

The data in the National Academy’s CAFE study indicated that, in fact, cars and SUVs are practically identical when it comes to overall safety. In terms of occupant deaths per million registered vehicles, cars had an overall death rate of 138, while the SUV rate was 140—a negligible difference. Despite everything we’ve heard about SUV rollovers and tire blow-outs, the NAS data show no real difference.

In both categories, moreover, the occupant death rate improved as size and weight increased, demonstrating yet again the lethal effects of downsizing. The most dangerous vehicles were mini-cars, with a death rate of 249. The safest were the largest SUV models, those above 5,000 pounds, with a rate of 92. Dr. Runge has yet to condemn mini-cars or praise large SUVs. What could be more politically incorrect?

Some SUV critics argue that while the vehicles may be safe for their occupants, they are unsafe for the people in the cars that are struck by them. This issue of vehicle incompatibility is complex, however, and it is questionable whether downsizing SUVs would produce enough benefits for car occupants to offset the dangers that it would pose to SUV owners. (Single-vehicle crashes account for half of all occupant deaths, and in those cases more mass greatly protects occupants while posing no risks to outsiders.) Moreover, the same argument could be used to downsize large cars in order to protect small-car occupants, or to downsize all cars in order to protect motorcyclists. If overall “social safety” were the criterion, the best approach would be to simply get rid of CAFE, which currently restricts the extent to which any car can be upsized and made safer.

But of course if safety were the criterion, we would never have had CAFE at all. At a minimum, it would have been hastily repealed after the National Academy report.

Appealing SUVs

The real issue in the anti-SUV campaign is lifestyle. SUVs have become popular because many people find them incredibly useful and appealing. They offer the passenger and cargo capacity that many downsized vehicles no longer have. (The old-fashioned full-sized family station wagon is practically extinct, due in large part to CAFE.) SUVs offer towing capability, a rarity in fuel-efficient front-wheel drive cars. They offer good sightlines, and maneuverability in bad weather and on bad roads—traits that even Consumer Reports admits are valuable. Their height makes them exceptionally comfortable for people who have trouble climbing up out of cars, since in an SUV you climb down. They offer security from smash-and-grab attacks while idling in traffic. They give us the ability to transport not only our kids but also our neighbors’ kids, together with our bikes and dogs and baby carriages. And in snow emergencies, they’re the ones called on to ferry hospital staffs and emergency supplies.

There’s no denying that SUVs do have a certain natural irritation factor, such as the visibility problems they can cause for car drivers. But this hardly accounts for the venomous nature of the attacks. Something else is at work here. Perhaps it’s the fact that SUVs are such an unmistakable sign of human abundance, of other people living their lives, having kids, buying things, going places, utilizing resources.

That never used to bother too many people, but it probably did bother the Duke of Wellington. Now it bothers the Duchess of Huffington. And thanks to our economic growth since the 1800s, her minions are unfortunately far more plentiful than were the Duke’s.

*National Research Council (NationalAcademy of Sciences), Effectiveness and Impact of Corporate Average Fuel Economy (CAFE) Standards (Washington, D.C.: NationalAcademy Press, 2002). See Finding 2 at http://books.nap.edu/books/0309076013/html/3.html#pagetop.

When Robert Johnson, founder of Black Entertainment Television, wanted a $190,000 Ferrari 360 Spider, he went to a German dealer, since it would have taken two to three years to obtain one from a domestic dealer. But it had to be modified to meet U.S. environmental and safety standards. That took 15 months.

If this were the only inefficient, silly, wasteful regulation, there’d be little cause for concern. But Washington is a regulatory behemoth, supplemented by state monsters of various sizes.

Last year Clyde Wayne Crews of the Cato Institute published his annual “Ten Thousand Commandments.” For the first time in years there was modest good news. For instance, the Federal Register in 2001 ran 64,431 pages, down 13.2 percent over the last full year of the Clinton administration. Also in 2001, 4,509 new regulations were working their way through the system, a reduction of 4 percent over the year before.

Still, the news is good only relative to how bad it has routinely become. The regulatory burden remains staggering. Perhaps the best estimate, from analysts W. Mark Crain and Thomas D. Hopkins, is that federal regulations cost the American people $854 billion, roughly 46 percent of the total $2 trillion in federal outlays this year. That’s about 8.4 percent of GDP.

It’s almost as much as collected by both the corporate income tax and the personal income tax. Per family it comes to $7,410. That means government is basically taking another fifth of the median two-earner income after direct taxes have been paid.

Moreover, the claimed advantages are often impossible to verify. For instance, the American Enterprise Institute and Brookings Institution’s Joint Center for Regulatory Studies estimates that roughly half of environmental regulations saves lives, but often at costs far disproportionate to the likely benefits achieved. And, incredibly, in about half the cases “regulations specifically aimed at saving lives actually resulted in a net increase in deaths,” according to the Center’s Robert Hahn and Patrick Dudley.

In another Center publication, Hahn and Cass Sunstein of the University of Chicago Law School, review some of the most perverse rules. The Environmental Protection Agency’s municipal solid-waste regulations generate costs of $100 million annually with no benefits. Pulp and effluent guidelines start at a net zero benefit at best and range up to a $150 million annual loss. The EPA’s ozone standards are already wracking up annual net losses in the hundreds of millions, with the potential of exceeding $9 trillion in a few years.

Some regulations are completely irrational. Consider Corporate Average Fuel Economy (CAFE) standards, by which the federal government mandates that auto manufacturers achieve an arbitrary level of fuel economy. It’s not clear that CAFE even saves energy. After all, raising fuel economy lowers the marginal cost of driving. Moreover, by forcing people into smaller autos, which lose in accidents with bigger ones (as well as vans, SUVs, and trucks), CAFE kills.

John Graham, formerly of Harvard University and now head of the Office of Management and Budget’s Office of Information and Regulatory Affairs (OIRA), and Robert Crandall of Brookings have estimated CAFE’s annual death toll at between 2,200 and 3,900. In the mid-1990s the Competitive Enterprise Institute figured that between 2,700 and 4,700 people were dying because of CAFE.

Even when some benefits might occur, there remains the problem of opportunity costs. Where an existing life is at stake it is tempting to say that every life is priceless. But when we are dealing with risks, no life is priceless. Every expenditure involves a tradeoff. The true cost of any activity is its opportunity cost, the value of forgoing some other activity. To spend $40 billion to save one potential life means that $40 billion is not available to improve roads and traffic signals or to do something else

Americans desperately need a wide-ranging program of regulatory reform. The executive branch can help. Graham has emphasized the importance of weighing costs as well as benefits and of considering “nonquantifiable factors such as fairness, privacy and personal freedom.” As part of its budget, the administration proposed additional changes in how benefits and costs are balanced. Agencies would have to compare different strategies for achieving the same ends, better address the issue of risk, and offer several estimates of benefits and costs for expensive rules based on “uncertain science.”

Crews, Hahn, and others propose a variety of other steps that would pare and improve regulatory policy. They start with reducing congressional delegation of power to regulatory agencies, further streamlining legislative procedures to overrule regulations, creating a congressional office of regulatory assessment (as an analog to the Congressional Budget Office), and setting statutory standards for regulatory disclosure, assessment, and oversight.

Just Say No

However, the most important “reform” would be the willingness to say no. Not every problem is worth regulating. Some cannot be solved by regulating. And many are not worth the expense of doing so. Besides, the free market is the most powerful “regulator” of all.

Reform in Washington isn’t enough. States have taken on an increasingly aggressive, and counterproductive, role. Particularly problematic is the increasing tendency of state attorneys general, almost all governor wannabes, to try to set policy independent of the federal government, such as their jihad against Microsoft.

People routinely refer to America as a free country. And compared to Europe, it is. There a frustrated European Commission recently declared that only through more economic reform could the continent catch up with America. Yet in 2002 the Washington-based Americans for Tax Reform pegged July 1 as “Cost of Government Day”—when we finally stopped paying to fund and comply with government. Of the 181 days spent working for the government, 38 went to cover the cost of federal regulation and 23 for state rules.

Then there’s the loss of simple personal freedom. For instance, Americans are not allowed to buy Kinder Surprise Eggs, chocolate eggs with tiny toys inside, which are available in Europe and elsewhere. Fanciers have to import them illegally through the Internet since both the Consumer Product Safety Commission (the toys pose a choking danger) and the Food and Drug Administration (the toys are an “embedded” non-food item) ban them here.

America, though it possesses the world’s leading economy, nevertheless faces some daunting problems. In such a world, it makes no sense to waste so many resources on trivial concerns.

The columnist Arianna Huffington recently criticized the Bush administration’s renewed intention to exploit the oil under the Arctic National Wildlife Refuge (ANWR). She proposed that instead of promoting oil drilling in Alaska, the administration should raise automobile mileage standards. But, she wrote, “the White House helped kill [a Senate] plan, which would have saved about 2.5 billion barrels of oil a day, roughly the amount we currently import from the Middle East.”

Huffington is referring to the federal CAFE (corporate average fuel economy) program, which since the 1970s has required automakers to achieve a specified miles-per-gallon average for their fleets. The program was enacted to conserve gasoline and oil. However, the Competitive Enterprise Institute says it “has yet to demonstrably reduce gasoline consumption.”

No mystery here. It is people, not inanimate cars, who will determine the consequences of the program. If we can drive our cars more cheaply, we will tend to drive more than before. Human beings are conscious of their circumstances, and we adjust our behavior accordingly. If my car gets 30 MPG instead of 15, why would anyone expect me to use less fuel? I can go twice as far for the same money.

Maybe the authors of the original legislation didn’t think of that, but their fallacy has been pointed out repeatedly for more than 25 years. (Kudos for CEI for making this one of its missions.) So anyone who today argues that higher CAFE standards will save gasoline is either engaging in demagogy or is incapable of analyzing an argument.

CAFE has had one demonstrable effect: To meet the fuel standards, the automakers have given us smaller, lighter, less crash-worthy vehicles. Thus, according to the National Academy of Sciences, an additional 1,300 to 2,600 people die on the highways each year.

* * *

The U.S. Centers for Disease Control is pushing the states to adopt uniform legislation that would give governors unprecedented powers to declare health emergencies and impose martial-law-type controls. Twila Brase looks at the ominous model bill and assesses its progress through the state legislatures.

No one wants the government to set the price of chicken legs. So why, asks Ted Roberts, does it try to fix the price of money?

You can argue with someone who claims that capitalism impoverishes workers or spoils them with wealth. But how can you argue with someone who makes both claims simultaneously? Jim Peron suspects that intellectual debate isn’t possible under such conditions.

Nine states are hounding Microsoft for allegedly being a monopoly. Yet the classic monopoly is right under their noses and they lift not a finger. John Berthoud wonders why.

The movie named best picture of the year for 2001 was about a Nobel prize winner in economics, John Nash. What was Nash’s contribution to economics and did the movie get it right? Sanford Ikeda has the review. A sidebar examines the mental-illness angle of the story.

If you’re looking for someone to say something nice about communism, don’t bother going to eastern Europe. Stephen Browne explains.

At one time, China would have been the sure bet to end up the world’s most dynamic society. What happened? Harold B. Jones Jr. says the Chinese lacked more than the right institutions.

When people who have not suffered real injuries can recover “damages” anyway, they victimize those who have been harmed. David Laband identifies the tragedy of another commons.

It’s an easy matter to show that state control has undermined medical care in America. What might a free market in medicine look like? Larry Van Heerden has some ideas.

Can it be that there are too many people on earth . . . who believe there are too many people on earth? Christopher Lingle thinks so.

Here’s what our columnists have cooked up this month: Mark Skousen ruminates on the four sources of happiness. Lawrence Reed has time on his mind. Doug Bandow says there’s a better way than foreign aid. Burton Folsom explodes some myths of the New Deal. Donald Boudreaux ponders a chief threat to civilization. Charles Baird exposes a union hustle. And Joseph Salerno, after reading William Safire’s plea for antitrust action, protests, “It Just Ain’t So!”

Our reviewers evaluate books on Ludwig von Mises, the therapeutic state, the misuse of reason, legal plunder, the Federal Reserve System, and the importance of free capital markets.

A quarter century after the misguided policies of President Jimmy Carter and a Democratic Congress created an “energy crisis,” President George W. Bush and a Republican Congress risk wandering down the same foolish path. Worst may be the campaign to lift corporate average fuel economy (CAFE) standards in order to make automobiles more fuel-efficient. Paradoxically, CAFE increases the amount of driving as well as the number of people killed in car accidents.

CAFE was one of a number of arbitrary measures to cut energy use imposed after the OPEC oil embargo. Congress enacted the program in 1975, mandating that the average mileage for automaker fleets rise from 18 to 27.5 mpg in 1985.

The industry complied by building cars that consumers didn’t want and selling them below cost in order to continue producing the larger autos that Americans did want. Smaller, luxury automakers simply paid off Uncle Sam: Companies like BMW, Jaguar, Mercedes-Benz, Porsche, and even Volvo have paid about half a billion dollars in fines.

Carmakers successfully lobbied to prevent any CAFE increase and to keep the level for “light trucks,” which include SUVs, substantially lower. Now, however, the legislative natives are getting restless, and Congress is moving to raise CAFE.

A Republican backbencher, Representative Lee Terry of Nebraska, has led the counterproductive charge. And the Bush administration, battered by environmentalists and anxious to sell its flawed, subsidy-ridden energy package, seems disinclined to defend the industry.

The most immediate beneficiaries of any CAFE increase would be Japanese and European manufacturers, which offer a smaller, more fuel-efficient product line. Business Week said, “Only Toyota Motor Corp. sells full-size SUVs and pick-ups, but sales of smaller SUVs, pickups, and minivans keep it safely below overall CAFE ceilings.” Moreover, the Japanese automakers possess future credits for being under CAFE targets in the past, improving their ability to compete in the larger car market.

The theory of course is that it reduces gasoline use. But people’s transportation demands reflect a number of factors, including the quality of autos and the price of driving. To the extent that CAFE makes new cars less desirable—reducing their size and engine power—it encourages people to hold on to their older cars longer and shift to SUVs, which are less fuel-efficient.

Moreover, when CAFE “works,” it reduces the cost of driving. Which means that it encourages people to drive more.

Environmentalists have long recognized that price matters, which is why many of them support hefty energy taxes. They argue that hiking the levy on gasoline would cause people to choose mass transit, consolidate errands, and carpool. But the more mileage your car gives you per gallon, the less incentive you have to choose mass transit, consolidate errands, and carpool.

Americans now average twice as many miles driven as before CAFE was imposed. That’s not all due to CAFE, of course, but no one knows how much, if any, gasoline has actually been saved.

Robert Crandall of the Brookings Institution says: “CAFE has had much less effect on total fuel consumption than a simple examination of new-car, fuel-economy trends might suggest.

Unfortunately, no one has conducted a definitive empirical study of CAFE’s effects that would give us a respectable estimate of the fuel saved. As in most environmental issues, this absence of evidence on the effects of policy simply allows proponents to press for even more stringent regulation.”

Lethal Standards

CAFE is a particularly bad deal for another reason. It kills people.

There is one clear rule of the road: big cars beat little cars. Any given auto can have fewer or more safety devices. But more metal around a driver or passenger almost always means a better chance of surviving an accident.

That smaller cars do worse in accidents is beyond dispute. In 1989 Crandall and John Graham of Harvard University reported a 23 percent average weight reduction in automobiles due to CAFE, warning that “the negative relationship between weight and occupant fatality risk is one of the most secure findings in the safety literature.”

People intuitively understand this rule. Clotaire Rapaille, who has studied the characteristics of SUV owners for the auto industry, says: “People tell me, ‘If someone bumps into me, I kill them, they don’t kill me.’”

Unfortunately, CAFE runs against this rule. Although there are a number of ways to increase gas mileage, the easiest and cheapest, and thus most common, method is to make cars smaller with less protective metal shells. Half of the dramatic downsizing over the last quarter century is due to CAFE.

Graham and Crandall estimated the annual death toll to run between 2,200 and 3,900. In the mid-1990s the Competitive Enterprise Institute figured that between 2,700 and 4,700 people died each year because of CAFE, upwards of one-fifth of America’s auto total casualties.

In 1999 USA Today analyzed federal crash data and concluded that 46,000 people had died because of the shift to smaller, lighter autos. This research is backed by a recent study in the American Journal of Public Health by Leonard Evans, on staff at the Vehicle Analysis and Dynamics Laboratory at the General Motors Research and Development Center in Warren, Michigan.

Evans says, “Replacing any individual car with a heavier one will in the vast majority of cases reduce total population risk.” The reverse is also true: “replacing all the cars in a population with cars lighter by a fixed amount or percentage will necessarily increase population risk.”

Thus drivers would be in greater danger even if all cars got smaller. Especially since there will always be SUVs and trucks of all sorts, which do significantly greater damage to smaller autos.

Federal regulators have attempted to avoid the truth, but in 1992 a federal appeals court dismissed arguments by the National Highway Traffic Safety Administration defending CAFE’s safety record. The agency’s contentions were based on “bureaucratic mumbo-jumbo,” “fudged analysis,” and “statistical legerdemain,” said the judges.

Evans offered his findings without any policy recommendation. But he noted that “When policies are expected to influence the mix of cars, however, effects on safety should not be ignored.”

Which means that CAFE should be repealed, not strengthened. As Sam Kazman of the Competitive Enterprise Institute said: “The notion that we can mandate more stringent CAFE standards without increasing traffic deaths is simply preposterous.”

America does not need a new government energy policy, especially one that needlessly kills a dozen people a day.

But saying that there is a limit to how much people will pay to reduce risk implies they are willing to spend something. People value safety just as they value other things, and they will purchase it up to the point where, in their estimation, its marginal value equals its marginal cost (the value of what has to be sacrificed to get the additional safety). In fact, we are buying more safety now than ever before because we are richer and can afford more of almost everything.

For example, our jobs are far safer now than they were in the past. In part this reflects the shift away from jobs demanding manual labor (like farming and mining) and into office jobs where paper cuts are the biggest hazard. But employers also spend more to provide safer conditions on all jobs because workers would rather have the additional safety than the higher salary and wages that otherwise could have been paid. We spend more on smoke alarms, slip-resistant bathtub interiors, air filtration systems, and outside lighting to make our homes safer. We demand levels of sanitation in the food we eat, the water we drink, the air we breathe, and the clothes we wear that would have been considered ridiculous a couple of generations ago, and unimaginable in many poor countries today. Airline travel is far safer now, with the number of miles traveled increasing as the number of airline fatalities is decreasing. And the car you drive today is safer than the ones available a few years ago because they are better designed, have better brakes, and contain more safety features.

Our increased demand for safety, and the response to that demand, is explained primarily by marketplace incentives. Without the cooperation and coordination created by market incentives, we would not have experienced the growth in wealth that increased our demand for safety. And when our demand for safety increases we can communicate that demand through prices and profits to those best able to respond. An automobile company that tried to sell cars no more safe than those made in 1970 would quickly go bankrupt, as would an airline with the same safety as 30 years ago. Some people will object that government regulations have forced automobile manufacturers, food processors, the airlines, building contractors, and employers to provide the additional safety. It cannot be denied that government regulations have had an impact, but it has been a far less desirable impact than most people realize.

Governments often enact regulations requiring more safety only after the private sector has started providing the desired amount. Indeed this is about the best we can hope for, even though government regulations commonly increase the cost of providing more safety by specifying one-size-fits-all approaches rather than allowing firms to use approaches best suited to their situations. But government regulators often require that we pay for far more safety than we want because of the tendency toward bureaucratic expansion, the desire for greater power, and the demands of politically organized groups. For example, some Environmental Protection Agency regulations are estimated to cost over $4.5 billion per life saved, and some Occupational Safety and Health Administration regulations that are estimated to cost over $72.7 billion per life saved.^[1]

The CAFE that Kills

Unfortunately, while some government regulations are making us buy very little safety at exorbitant cost, others are discouraging us from buying a lot of safety at low cost. Consider federal Corporate Average Fuel Economy (CAFE) regulations that require automobile manufacturers to produce vehicles that average no less than a specified number of miles per gallon. CAFE now requires that new cars average 27.5 miles per gallon and that new light trucks (pickups, minivans, vans, and sport utility vehicles) average 20.5 miles per gallon. These regulations were imposed in 1978 to force us to conserve gasoline—after the federal government imposed gasoline price controls that denied people the information and incentive to conserve more efficiently on their own. More recently, environmentalists have lobbied for increasing the required mileage to cut down on the emission of pollutants and alleged greenhouse gases.

It is not clear that CAFE standards do much, if anything, to reduce either gas consumption or pollution. To the extent that the standards increase gas mileage, the cost of driving will go down and people will drive more miles. Also, because the standards increase the cost of new vehicles, particularly the larger ones that are artificially restricted in supply, people drive their old cars longer than they otherwise would, and older cars commonly get poorer gas mileage and almost always pollute far more than new cars. But it is clear that CAFE standards do increase traffic fatalities by preventing people from buying additional safety at very little cost.

Because of CAFE standards, automobile manufacturers have had to produce cars that are smaller and lighter on average than consumers want to buy. Straightforward physics insures that, everything else equal, smaller and lighter vehicles are less safe than large heavy ones—occupants are closer to windshields and dashboards and they are surrounded with less cushion. Not surprisingly, a recent study using government and insurance data found that for every mile per gallon added because of CAFE, 7,700 additional lives are lost in traffic accidents.^[2]

One has to conclude that there is a stronger bias in the political process to expand regulations than to increase safety. What other explanation is there for simultaneously imposing regulations that provide almost no safety at ridiculously high costs and preventing people from significantly reducing their risks at the cost of a few gallons of gas? Unfortunately, CAFE is not the only regulation that prevents people from buying more safety at low cost. For example, thousands of people have died needlessly in the United States because of federal Food and Drug Administration restrictions on buying medicines that have been widely and successfully used in other countries to reduce the risks of heart attacks, strokes, and other diseases. Details on these restrictions will have to wait until a future column. []

Notes

1. I discussed these and other examples of extremely costly safety regulations in my October column and explained why they result in less, rather than more, safety.
2. This study was discussed by Murray Weidenbaum, “Saving on Gas Costs Us Money—and Lives,” Chicago Sun-Times, September 17, 1999, op-ed page.