The Mercatus Center released a paper (PDF) this month co-authored by Ted Gayer (an economist at the Brooking Institution) and W. Kip Viscusi (an economics professor at Vanderbilt), titled “Overriding Consumer Preferences with Energy Regulations” which questions the economic justification for various government schemes implemented to force energy efficiency improvements in consumer household products, automobiles, lightbulbs, etc. The abstract is below:
This paper examines the economic justification for recent U.S. energy regulations proposed or enacted by the U.S. Department of Energy, the U.S. Department of Transportation, and the U.S. Environmental Protection Agency. The case studies include mileage requirements for motor vehicles and energy-efficiency standards for clothes dryers, room air conditioners, and light bulbs. The main findings are that the standards have a negligible effect on greenhouse gases and the preponderance of the estimated benefits stems from private benefits to consumers, based on the regulators’ presumption of consumer irrationality.
The paper walks through the basic economic understanding of consumer rationality, and explains why behavioral critiques of consumer rationality fail to undermine the general conclusion that consumers are overwhelmingly rational and tend to act in their own best interest, and that “in most contexts consumers are better equipped than analysts or policymakers to make market decisions that affect themselves.” [click to continue…]
Today the Senate Energy and Natural Resources Committee marked up and approved S. 398, a bill that establishes new efficiency standards for a variety of consumer products: air conditioners, refrigerators, freezers, washers, dryers, outdoor drinking water dispensers, dishwashers, and a number of other appliances. You can certainly trust Congress to micromanage the optimal amount of energy used by hundred’s of complex small appliances across different industries.
This bill saw national media coverage earlier this year when Senator Rand Paul ranted about efficiency standards that have effected toilets and will soon effect light bulbs. It’s infuriating that energy bureaucrats can claim that they are in favor of allowing consumers to choose whichever bulb they want, when they are setting bulb efficiency standards that will ban the traditional incandescent bulb. At least be honest about your desire to restrict the choices of consumer and our freedoms.
Politico covered today’s hearing and Paul was unsurprisingly one of the few dissenters. This time Senator Paul offered an amendment that would make the energy efficiency standards voluntary, which failed 16-6 in committee. Here is a short video from Paul’s office covering the hearing.
Consumers should be wary when business gets together and supports these types of standards, though the environmentalists often use this as evidence that only ‘crazies’ oppose such bipartisan, “sensible” legislation. These regulations will increase the cost of these appliances (and the profitability of them), create new competition-crushing barriers to entry, and often bring unexpected consequences (and here). Recall that a number of oil and energy companies supported the Waxman-Markey bill after it went through the Congressional pork factory.
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