Is John McCain A Complete Economic Idiot?

Irrespective of what McCain flip-flopped on, wouldn't it be a generally good idea to allow states the freedom to set their own standards outside of the dictates of a federal agency? Even if it would result in a "nightmare patchwork of regulatory standards"--and I'm not debating that it would--don't we have the free market to deal with that sort of thing?

Liberty is messy. If California decided to set especially strict mileage standards, then it would make economic sense for the automakers to simply not sell vehicles in California. And when that happens, maybe the residents there would start to get a clue about the balance between environmental standards and practical reality, and demand their representatives get a clue, too. Whatever gestures toward green policies the California government makes, its people still love their cars, and the looming specter of not being able to have any more solely due to stupid standards would do wonderfully to focus the mind on this particular matter.

It's true that California would use this sort of freedom to do stupid things, but you'd think that libertarians, at least, would be arguing that people ought to be able to have the freedom to do stupid things, up to and including commit economic suicide. Just in the way that we are individually responsibie for our actions, the citizens of California are responsible for what their representatives do--they elected them, after all, and if they were too lazy to pay attention the candidates and find themselves saddled with lousy representation, well, sometimes it takes a harsh lesson to knock some sense into somebody.

If McCain would make that kind of argument, I wouldn't necessarily think him economically stupid, but regardless, it's politically stupid, if he wants to win Michigan and Ohio. I don't think that there should be CAFE standards by either the Feds or the states. Trying to monitor and enforce them, particularly when there are multiple ones, would be a nightmare for the industry. As is pointed out over at the Planet Gore post that I linked to, the states already have a means of forcing mileage higher--increase their gas taxes.

"I guess at the end of the day, I support the states being able to do that,"

I actually tend to agree, except for the fact that CA's requiring such standards would raise the cost for everyone else, so this isn't so much a matter of letting states do what they want, as a matter of California forcing it's own views on the other states. I don't see that as an improvement over the federal government doing the same thing.

There's a big gap between people doing stupid things and the huge government doing stupid things. When an idiot wins a Darwin award, others laugh. When California sqeezes carmakers, whole country is damaged. How can you even make such ridiculous argument is beyond me. What next, support for boutique blends of gasoline? No wonder Barr locks the loon vote.

No real argument there; when it comes to regulatory regimes, having a per-state system in place is only scarcely better than a federal one, and even then mostly because of how it averts centralized control and forces the states to compete in terms of ideal regulations. (Given that states with more lax regulations would naturally get more business.) So the ideal would be to just remove them altogether, at least as far as CAFE standards go. It's not as though great fuel mileage isn't a positive good for car buyers, especially as the price of gas increases, so there's incentive to develop vehicles with good mileage anyway.

As for McCain's political stupidity, in one sense I agree. It's not going to get him any votes--how many people actually vote on the basis of a candidate's opinion on the federalization of CAFE standards--and even if it did, it would cost him as much elsewhere, and be a wash. So if you think he was trying to pander, there's no sense there. On the other hand, it might be that he realizes that complete abolition of CAFE standards is highly unlikely, and that baby steps toward leaving it up to the several states would be at least some small progress. If that's the case, he sounds more principled, especially given how he was talking about this to people in Michigan. Aren't we always talking about how we prefer politicians to be straight talkers rather than panderers?

Given his precarious position nationally, though, and the fact that for all of our supposed preference for straight talk we keep electing prevaricators and punish anyone who dares speak the unpleasant truth, it /is/ probably an unwise political move.

To clarify, it's entirely possible that this is just an exercise in ignorance, whether political or economic. But I don't think it's a foregone conclusion without some clarification. McCain's said a lot of stupid things on the economy, yes, but there's still some possibility here that it was other than it seems.

Of course, if he wasn't able to articulate that to begin with, there's a problem in and of itself.

> On the other hand, it might be that he realizes that complete abolition of CAFE standards is highly unlikely

Is there any reason to think that McCain sees letting CA set its own standard as a move to abolish CAFE? Is there any reason to think that he sees abolishing CAFE as a good thing?

Absent both of those things, why would one assume the relevant good intent? (Besides, intent is trumped by effect.)

> and that baby steps toward leaving it up to the several states would be at least some small progress

Mid points can easily be worse than either of the end points, regardless of how good one of them is.

It isn't just CA; many of the other nut-states have tied themselves to CA. As a result, CA-CAFE would be national CAFE.

As bad as national CAFE established by Congress is, letting it be set by CA is even worse.

wouldn't it be a generally good idea to allow states the freedom to set their own standards outside of the dictates of a federal agency?

I suggest there's a substantial "free rider" problem. If California sets unusually high emissions standards, the cost of meeting them will not be borne solely by California car buyers. Buyers in the rest of the United States will pay a little extra for the design and development cost of cars that can meet those standards, since it's just not practical, the car business being what it is, for a national car company to have two complete development tracks: one for national cars, one for California cars.

Hence California would (unfortunately) be motivated to boost the standards higher than they might otherwise do, were they to pay the full economic costs as well as reap the full ecological benefits. It's a form of tragedy of the commons.

The Founders understood perfectly well that interstate trade was one area in which it did not make sense to allow the "fifty laboratories of democracy" experiment to proceed, hence it is one area where they explicity gave Congress the power to overrule the states.

Let's look at it this way: allowing California to set different standards for cars that raise their cost is economically equivalent to allowing California to impose a tariff on the importation of cars. We all know why internal tariffs are forbidden by the Constitution: because the Founders knew first-hand how amazingly damaging they were to the national economy, and how poorly ordinary economic signals regulate them.

Carl,

That was something I hadn't considered, and it makes sense to me. I was originally considering something more radical along the lines of "don't sell cars in CA, period" instead of "set up two different development tracks", even though I recognize that such a thing would be just as practically unlikely.

Still, it's good to encounter sometimes a reasoned debate instead of being told I'm a shill for Bob Barr (?!).

allowing California to set different standards for cars that raise their cost is economically equivalent to allowing California to impose a tariff on the importation of cars.

Exactly right. This isn't a 10th Amendment states right discussion as Matt would have it. This is a Commerce Clause discussion. Congress has a duty to regulate commerce, and this is primarily to define standards of trade between states.

Now, if California wanted to promote its own businesses to develop cars which are more fuel efficient, that would be reasonable. In this case, California wants to impose standards that raise the selling price of a good artificially for the explicit purpose of reducing the usage of this good.

I disagree. I don't see this as a Commerce Clause discussion. California regulations would only apply to cars sold in California. Further, sin taxes and advertising restrictions are (unfortunately) well established domain of the States' powers. There's no real difference legally between regulating cigarettes to reduce consumption and doing the same with automobiles. So I see no obstruction here to commerce between states or any of the other parties that the Commerce Clause applies to.

Pssht, Karl, the Commerce Clause doesn't forbid States from doing anything. It just gives Congress the power to override the States' decisions, if those decisions have substantial impact on interstate commerce. Whether Congress actually does so or not is up to them. Sometimes they do, sometimes they don't.

And also, an internal tariff would function exactly the same way, be a tax on goods sold in a given state. The reason it doesn't pass Constitutional muster is that it's a tax on goods sold in a given state but manufactured in another. Since that's how it works with cars -- I don't think any of them are made in California -- it's a similar situation. It differs in that whether a Court is willing to regard a regulation imposing costs as equivalent to a tariff is unclear. Sometimes they do, sometimes they don't.

I would be surprised if the Supreme Court would disagree if Congress were to actually get up on its hind legs and forbid California from setting higher emissions standards than Federal standards. But Congress does not seem inclined to do so, probably because of the very free-rider problem I mentioned: the opponents of such a move (the folks in LA suffering from smog) are concentrated and visible, but the beneficiaries (the people in Montana and Nebraska who have to pay slightly more for their cars, so the cars can satisfy Los Angeles smog standards) are widespread, heterogeneous, and invisible.

Carl Pham wrote:

"If California sets unusually high emissions standards, the cost of meeting them will not be borne solely by California car buyers. Buyers in the rest of the United States will pay a little extra for the design and development cost of cars that can meet those standards, since it's just not practical, the car business being what it is, for a national car company to have two complete development tracks: one for national cars, one for California cars."

Really that already had happened in the past and still really continues to this day. Back in the day (late 60's/early 70's) manufacturers would sometimes produce 2 different engines emission system one for the rest of the country and one for California. But more often they would just role the cars out the factory with the stuff mandated by California. For people in California they have to have all that stuff in place. Otherwise, everyone else with a 1/2 inch wrench and a hammer would take the car home and pull the unneeded emissions crap off. For instance, carburetors would either be anemic/constrictive peices of crap with lean idle dashpots. People would quickly swap them out for a proper Holley or Carter carburetor.