Thursday, September 04, 2008

The economics of bad cars

Shunning as he does the broken brand that is the CEI (which is not non-partisan no matter how many times it's said), Myron Ebell has been posting almost weekly on the blog of There's nothing there but paving slabs of miserable misguidance on this particular road to hell. However, occasionally, he rises above himself to post something so awesomely contradictory it's worth repeating:
(2008-09-03) ...As for the automaker bailout, Detroit has been cleverly maneuvering to make this a deal that Congress can’t refuse for the past year.

They have now presented it over the August recess so that it will be taken up just before the election.

The first number I heard in July was $25 billion in loan guarantees, but now it’s up to $50 billion.

We at CEI aren’t sympathetic to taxpayer bailouts of big businesses that can’t compete in the market, but I must add that in this case, GM, Ford, and Chrysler can argue that many of their current woes have been caused by federal government policies. The Corporate Average Fuel Economy (CAFE) standards enacted in the ’seventies have put Detroit at a long term competitive disadvantage versus the Japanese automakers.

This disadvantage was made worse by the much higher CAFE standards enacted by Congress (and reluctantly supported by Detroit’s Big Three) last December. High gas prices are also hurting Detroit, and again the federal government could be partly to blame.

Thus the automakers do have a case to make, although that doesn’t mean CEI will be supporting the bailout. And it’s one that will be hard for Congress to resist because auto jobs are spread all around the country.

Is Myron suggesting that cars made in Detroit would be more popular with consumers than Japanese cars if their fuel efficiency was even more crappy than it is today?

Regulation is necessary because there is a proven market failure with regards to automotive fuel efficiency (not to mention automobile safety). For whatever reason (ignorance, stupidity, malicious propaganda from Myron and his pals), not enough consumers take account of future price rises and environmental devastation when deciding to purchase and use their vehicles. Any auto executive who knew that the US car industry would be doomed when oil prices rose and invested in better technology would be driven out of business by his rivals who do not care about the long term prospects, because they want their profits NOW.

Regulation is essential to avoid the market undermining any possibility of preparation for the future. It's what saves the system from its own self-destruction. The problem is, Myron is looking forward to destruction. If he can do it by pushing a creed in which it is impossible to conceive of a concept known as market failure, then that's what we hear.

Either capitalism dies, or the planet dies, or capitalism gets responsibly regulated, and there's no evidence of that while they continue to pay Myron a salary.

Meanwhile, the benefits of improved energy use continue to be suppressed by the oil men in the White House.


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