Arnold Kling  

Regulatory Pollution

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The Budget Debate, IX... Stock Market Regulation...

Discussing a forthcoming study of air pollution by Joel Schwartz, Ronald Bailey writes,


For example, [Schwartz argues that] a proposal to raise the prices of conventional cars and use the extra money to lower the prices of electric cars—which are estimated to cost $17,000 more than conventional cars—would be counterproductive. Since new conventional cars will be virtually pollution-free soon, raising their prices will have the perverse effect of encouraging drivers to hold on to their older, more polluting, jalopies longer, thus increasing overall emissions.

For Discussion. What are some more efficient ways to regulate automobile air pollution in the context of ongoing technical change?


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COMMENTS (3 to date)
Eric writes:

Ah, my favorite subject and object of my undying affection, the automobile.

No kidding, automobiles that meet the California Air Research Board's SULEV (Super Ultra Low Emissions Vehicle) standard are essentially zero emissions vehicles. Take a quart of oil, dump it on the ground, and you have exceeded the amount of hydrocarbons a SULEV will emit over 100,000 miles.

And it didn't take any extraordinary technology for automakers (Honda, mostly) to meet this standard. They just tweaked their existing technology, moving the catalytic convertors closer to the engine so that they heat up quicker when the engine is cold, for example.

To me, there is no value in cutting automobile emmisions further. Better to keep the current standards in place, and allow the (substantial) costs of these technologies to drop, thereby making new cars cheaper, thereby enticing owners of dirtier, older cars to trade them in for cleaner, newer cars.

Also, there is an issue with economies of scale. Automakers need to offer different emissions contols in different states. Better to standardize on one standard, even if it is dirtier. It is no good that most states meet LEV standards, the east coast has ULEV standards, and California has SULEV. That needlessly raises costs, and intices people to keep driving that old clunker.

Indeed, I assert that GM and its 0% financing did more to clean the air than Honda did in developing SULEV technology! This is so even when GM sells Tahoes and Honda sells Accords. Emmisions are measured an a weight of polutant per mile basis, and so a gas guzzler is technically cleaner than an economy car on a per gallon basis.

Neel Krishnaswami writes:

It seems like the least-distorting way to reduce CO2 emissions would be to increase gasoline taxes, rather than mandating specific emission standards.

jtrousdale writes:

I have a question!
It deals with resource economics, which i figured would be of interest to people posting about pollution.

Alan Randall identifies nine different types of goods based on
concepts of rivalry and exclusion in "The Problem of Market Failure",
Chapter 9 in Economics of the Environment, Robert Dorfman and Nancy
Dorfman (eds.), W.W. Norton (3rd edition), New York (1993). They are:

1. Nonexclusive, Nonrival;
2. Nonexclusive, Congestible;
3. Nonexclusive, Rival;

4. Exclusive, Nonrival;
5. Exclusive, Congestible;
6. Exclusive, Rival;

7. Hyperexclusive, Nonrival;
8. Hyperexclusive, Congestible;
9. Hyperexclusive, Rival.

"Hyperexclusive" refers to goods that are condusive to discriminatory
pricing, and permit "Lindahl" pricing, which extracts all of the
consumer surplus by charging each consumer at his own demand level.
"Congestible" refers to goods that are nonrival for a certain amount,
until a capacity constraint is reached. For such goods, initial
capital costs tend to be high, while the marginal cost of adding an
additional user remains low until the capacity constraint is
approached.


Randall asserts that goods of types 8 and 9 "may, in principle be
provided in efficient quantities by priate or public sector. In these
cases HYPEREXCLUSION REQUIRES, AMONG OTHER THINGS, THAT THE PROVIDER
ENJOY MONOPOLY STATUS. Such a perfectly discriminating monopolist
would extract... all of the economic surplus... Pure profits may
therefore arise, in violation of the conditions for
Pareto-efficiency..."

Here is my question:
Concerning the CAPITALIZED part, is it always true that the provider
MUST enjoy monopoly status? Or, can all of the competitors in the
market act similarly and discriminate simultaneously, so that the
consumer has no other choice?

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