CAFE Talk

David:

The problem with Bob Lutz’s claim that the CAFE requirements will add $6k to the average price of a car is that American industry has shot itself in the foot with too many extravagant claims in the past of the cost of government regulation, only to underestimate their creativity and productivity of their own engineers.  Back in the early 1970s, the then-president of Ford, an obscure executive named Lee Iacocca, said that the Clean Air Act would require shuttering the American auto industry.  It is possible that he really believed this given the realities of the time, but the subsequent embarrassment over these kinds of claims has eroded the credibility of industry complaints about regulatory cost.  Lutz is setting himself up to be called Lutz the Clutz.

This does not mean I am in favor of the CAFE standard–shudder!  But the better argument against it is the more subtle one that meeting the standards will require a fleet of cars consumers don’t want (Lutz may be right this time about the cost, but I rather suspect that once scaled up, the lightweight cars needed wouldn’t cost $6k more, but no one will want them), and, more importantly, will divert scarce auto industry engineering talent to meeting the CAFE requirement for gasoline engines rather than developing the next generation of cars that run on something else.

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