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Argument: Fuel economy standards do not increase cost of making cars

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Felix Salmon. "GM's Weak Arguments Against Increased Fuel Economy Market Movers." Portfolio. 10 Sep. 2007 - What wonders of disingenuousness the auto industry is capable of! Right now, the Big Three are worried about proposals to mandate that they increase the fuel economy of the vehicles they sell, and so they're wheeling out economists to say that the proposals don't make sense. But one would think they could do better than this.

The economists (Robert Crandall and Hal Singer) start off badly by asserting that "no one disputes that more stringent CAFE standards would increase the cost of making a car". CAFE stands for corporate average fuel economy, and is the mechanism by which the US government regulates automobile mileage. And I, for one, am far from convinced that higher CAFE standards would increase the costs of making a car. In fact, insofar as they encouraged auto makers to make smaller cars and fewer SUVs, higher CAFE standards might even decrease the costs of making a car. Remember that cheaper cars, as a rule, are actually more fuel-efficient, not less.

So color me unconvinced that "carmakers would have to employ very expensive technologies" if this legislation goes through. Every time the US government wants to regulate Detroit we hear the same thing, and every time the regulation happens, the costs magically fail to materialize. Besides, regulations in the US are far less stringent than they are in Europe and Asia. Since the US car companies compete in those markets already, why can't they just import their own technologies from abroad?

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