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Friday, June 27, 2008
Should the U.S. have allowed low-mileage vehicles to become so common?
Andrea Cornell Sarvady, a left-leaning columnist, writes the commentary this week and Shaunti Feldhahn, a right-leaning columnist, responds.
Rebuttal
You know what? I wonder if we should ever have allowed automobiles to become so common in the first place. We’d have no gas-price problems. Maybe when buggy-whip makers started struggling we should have created incentives to buy harness horses and told Henry Ford to take a hike. Or a bike.
But wait - people wanted automobiles, and for good reason: they made life easier and vastly expanded national productivity. They also introduced many new challenges, but those challenges were better managed when the government put certain boundaries around the market — such as judicious gas taxes to pay for better roads — and then got out of the way.
Letting the free market work isn’t the fastest process, but it is by far the best in the end. Today’s issues provide a great case study. The same consumers who wanted gas-guzzler SUV’s - like the 10 mpg Hummer H2 — are now selling them and buying more efficient vehicles. Even before oil hit $100 per barrel, Hummer sales were down 25 percent in the first two months of 2007. And hybrid sales are skyrocketing — up 58 percent in April 2008 alone. I bought a Toyota Camry hybrid myself last year, and am really enjoying getting 35 mpg right now! With hybrids being snapped off the lot at premium prices within hours of arrival, car manufacturers are highly motivated to produce more — and to develop even more fuel-efficient vehicles. That’s the free market working. No taxes or laws needed.
Andy wants higher gas taxes? The last time we saw these oil prices was 1981, and today’s gas taxes (adjusted for inflation) are already 50 percent higher than they were then! Our politicians must avoid the understandable temptation to go for the short-term, knee-jerk responses that will further skew the market’s ability to deliver the best solution. If any government intervention is needed, it isn’t to impose more costs but to provide incentives for rapid private-sector development of alternative technologies and fuel sources that can then be tested in the market.
As Sheldon Richman of the Foundation for Economic Education put it in an interview, “F.A. Hayek called competition a discovery procedure. We learn things in the open market better than we can learn things in any other way.”
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Commentary
By Andrea Cornell Sarvady
Few expected gas to hit four bucks a gallon but everyone knew it was on its way up. Therefore, the consequences of a light-truck surge should have been clear to all of us, especially given our recent history. John Duffield, author of “Over a Barrel: The Costs of U.S. Foreign Oil Dependence” told me in a recent interview that U.S. consumption of oil has declined only when the price of gas went up dramatically, precipitated by events like the Arab oil embargo and the Iranian hostage crisis.
One could view this as proof positive that the free market works. Yet do we really want overseas incidents by rogue governments to be the driver of our free markets?
Increasing gas taxes when the price was right would have been sensible intervention. Higher prices would have cushioned the impact of the inevitable gas hikes and lessened our hunger for oil, funding much-needed highway improvements. Duffield agrees that “the most economically efficient solution is a tax because it leaves it up to consumers how they’re going to cut back on consumption.”
Wrongful government intervention? Consider that at the peak of the SUV frenzy, policy makers were intervening in the opposite direction: a $25,000 tax write-off, not just for ranchers or contractors with a true need for light trucks, but folks hauling nothing on perfectly paved roads. Add to that the watering down of mandated fuel economy standards and it’s pretty obvious that we’ve spent the last decade driving too much car, cruisin’ for a bruisin’.
Consumers are driving more sensibly now, but pinning too much hope on an offshore drilling fix. Experts agree that it’ll be a decade before we can bring domestic oil to market; even then, it’ll cover only a fraction of U.S. consumption. Conservation is likely to reduce foreign dependency more than domestic drilling — and who says the two are mutually exclusive?
Our lack of foresight on this front reminds me of all those SUV commercials; macho trucks tearing blindly up the side of a hill, reaching a desolate plateau. Now we’re all sharing that vista and what do we see? National security risks, economic hardship, and continuing environmental costs. Some scenery….