Truck and Barter: The Quality of Regulation

August 30, 2004

The Quality of Regulation

By Ian

Did you just buy a Toyota Prius? Feeling pretty good that you just did something good for the world by buying an incredibly fuel efficient car? Well, you might not be doing as much as you originally thought.

How's that? Well, turns out that the EPA is apparently using tests from the 1960s and 70s to figure out the numbers they (and only they) slap on the sides of new cars and use to regulate the car industry in the US.

Like many new owners of the Toyota Prius, Margo Oge noticed something surprising once she began driving her new car last winter: Her gas mileage was well below the numbers listed on the sticker. The popular, pod-shaped Prius--a "hybrid" vehicle with an electric motor that augments the gasoline engine--is supposed to average about 55 miles per gallon. But she was getting less than 40.
That hit home. Oge is one of the top administrators at the Environmental Protection Agency, which sets the mileage figures for cars sold in the United States. And even she acknowledges that the problem is not the Prius's performance but her agency's tests. The EPA's methods for measuring fuel efficiency date to the 1960s and '70s and don't account for a lot of changes. Air conditioning and other new features consume extra energy. There's more traffic now, and driving habits have changed as people have moved to the suburbs. "We need to give more realistic information about fuel economy," Oge says.

When people argue for creating or extending regulation, they never quite get around to discussing what happens when things change faster than the ability of the regulators to deal with. By construction this is true, however. Since the regulators are working to set standards and limits, they are always in the reactionary position. They create incentives, by mere dint of their existence, for people to find ways around the rules; innovation designed to escape or bend regulation. The regulator has no such incentive to figure out ways to get around its own rules, and thus has to adapt to change only once they've finally noticed what the group they're supposed to be covering has done. Add to this the fact that when people talk about regulation, they are almost always talking about government regulation, which will slow down functions even further.

Of course, in this case it's not entirely in the interest of the automobile industry to get the standards changed, since the EPA is overestimating fuel efficiency. From my perspective, however, this is worse than the EPA getting things right. Not only do we have regulation that hampers growth and change (remember how the auto industry responded to the 70s oil shocks -- smaller cars) based on natural market motivation, but the agency we're stuck with is bad at its job and isn't even getting close to meeting the standards that are (somehow) justification for its existence.

Maybe this should have gone under Statsmerkwurdigkeiten. But I think pointing out the oddity of the EPA is a boat that sailed a long, long time ago...

Posted at August 30, 2004 05:43 PM

Comments

I dunno, if the estimates are off for both hybrid and normal, you're still better off with the hybrid, assuming they're not off by a larger amount (which the article said might be true, but didn't prove). The cost-benefit calculation of a hybrid also has to assume something about future oil prices, which everything I've read indicates will be going up for many different reasons. Thus, on the whole, hybrids still look good.

Comment by Lugo at September 2, 2004 01:49 PM | Permalink

Oh please, Ian: countries subsidize the auto industry so heavily, it's pretty silly to pounce on the EPA for having a dilemma when it comes to measuring emissions. I say "dilemma," because if the methodology changed then the major corporations in our Sovietized economy would complain about that the greenheads were persecuting them.

Comment by James R MacLean at September 2, 2004 06:29 PM | Permalink