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Monday, June 10, 2013

The Law of Diminishing Returns and Government Regulation

Or, more correctly, the law of diminishing marginal utility. Anyway, the example is why Americans can't enjoy cars with the same low price and high gas mileage as other countries, and it is rooted in overweening government regulation and paternalism:

Imagine that: A 40 MPG-plus car that costs less than $10,000 and which isn’t a flimsy/shoddy latter-day Yugo, either. It’s not the quickest thing on wheels – depending on the engine, zero to 60 takes 12-15 seconds – but it’s certainly adequate for A to B commuting and general knocking around. It’s only slightly less quick than a Prius C, hybrid – which takes about 11.3 seconds to get to 60 (and costs almost $20,000).

Unfortunately (for American car buyers) the Sail does not pass muster with current EPA emissions and DOT safety requirements.

Hence, it cannot be sold here.

But it is neither “unsafe” – nor “dirty.”

The Sail would probably meet the EPA/DOT standards in effect circa 1990 – by which time new cars were so “clean” that only about 5 percent of what came out of the tailpipe was other than water vapor and carbon dioxide (an inert gas that has nothing to do with the formation of smog). Since that time, the EPA has pursued a policy of diminishing returns by insisting that the remaining 5 percent of the exhaust stream that’s not water vapor and C02 be “controlled.” Instead of a $200 catalytic converter, a $70 oxygen sensor and a $500 throttle body fuel injection system – which cleaned up 90 percent of the exhaust – it’s $500 a piece for for multiple close-coupled cats, $2,000 for direct gas injection (and so on) to get a 1 percent (if that) additional reduction.

But that’s not the way it’s presented to the public. EPA will instead say that its newest mandate will “cut new car emissions by 50 percent.” Which is technically true. But what EPA never tells you is that they mean 50 percent off the remaining 3-5 percent of tailpipe emissions that are not yet “controlled.” In other words, a fractional reduction – at ever-increasing cost to consumers. But that doesn’t sound as good as saying the new edict will “cut new car emissions by 50 percent.” So it’s not said.

It’s a similar story with regard to DOT “safety” edicts.
 Read the whole thing.

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