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Comment by Rescis | Hacker News Reader

By lowering the cost to manufacture a vehicle by reducing the artificial constraints imposed by environmental regulations, more people are able to purchase vehicles at a lower cost, leading to an overall higher standard of living for the poor who couldn't otherwise afford the aforementioned vehicle.

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But then they end up spending even more in gas than they saved.

Also, poor people aren’t buying new cars, they’re buying used cars. So it’ll take a while for new more efficient cars to trickle down, and by that time they’ll have depreciated well past the theoretical delta in price.

It could also be that regulations lead to a superior and different, not necessarily more expensive design.

Good theory, but you’d have to know the incremental cost of the lower emissions on a per-vehicle basis, and what effect those costs have on purchasing decisions (taking into account alternatives and so on). First, is there any basis for assuming a more fuel efficient car is in fact more expensive to produce on a per-unit basis? For example, a smaller car will be more fuel efficient than a larger car using the exact same technology. Of course there are probably some approaches that do cost more, like using more expensive materials that are lighter in weight or something. But even so, let’s talk percentage difference. Is the MSRP 1% higher? 2%? It’s pretty preposterous to suggest that someone were talking about here (lower class rural) is going to be buying a new car anyways, and that a small increase in the purchase price will swing that decsuson. If you make minimum wage and you want a new F150, whether it’s $35k or $36k ain’t gonna matter - you can’t afford it anyways. So we’re talking used market down the road, and that higher initial purchase price will be discounted at the rate used cars depreciate, so our couple of percent increase is now a fraction thereof.

> is there any basis for assuming a more fuel efficient car is in fact more expensive to produce on a per-unit basis? For example, a smaller car will be more fuel efficient than a larger car using the exact same technology.

This comes up pretty frequently in car discussions. Making smaller cars helps you meet American fuel efficiency requirements, but it's terrible if you also want to (have to) meet American crash safety requirements.

In economics, everything is on the margin. In engineering, constraints tend to define tradeoffs.

If we look at the population, then for everyone that needs/wants a car of size X, age Y, and cost Z, then fuel efficiency regulations that increase the engineered complexity of the vehicle will push up the cost and mean the consumer has to trade off with a smaller car, older car, or some other aspect.

Discretizing the population into poor people that can't afford a truck and rich people that can is meaningless when there is an entire distribution of people's incomes and spending preferences.

But the assertion was that environmental regulation was regressive, in that it disproportionally impacts those on the lower end of the socioeconomic spectrum. So I was trying to show, a bit ham-fistedly maybe, that incrementally more expensive new vehicles do not impact the lower socioeconomic rungs very much.

> First, is there any basis for assuming a more fuel efficient car is in fact more expensive to produce on a per-unit basis?

Great question! There's actually some pretty good literature on it from energy and policy economists. The auto industry, the EPA, and the NHTSA all pull from very similar general background estimates.

"A 1991 study performed by Greene[1] concluded that, for every one mile-per-gallon increase in vehicle fuel economy, the average, per-vehicle cost would be within the range of $100-200 dollars, in constant 1985 dollar terms, and corresponding to a range of $200-400 in 2010 dollars. A review of CAFE by Klier and Linn[2] found that numerous other studies have confirmed these figures. Using the range found in the literature, the projected 12.7 MPG improvement in fuel economy would cost on average somewhere between $2,500 and $5,000 per vehicle."

So... that's the industry perspective. But that's a simple review of the background literature, so it's not that radical. The EPA and NHTSA dip only slightly below the low end, getting down to $2,000 using additional assumptions on that baseline, such as learning curves from past R&D making newer developments cheaper. But the regulators still estimate a positive cost per vehicle. The debate between regulators and industry is the extent of that cost, not whether that cost exists at all.

It's a fascinating area of research, notwithstanding the minefield of biases one has to sort through.

[1] Greene, David L. (1991). “Short-Run Pricing Strategies to Increase Corporate Average Fuel Economy.” Economic Inquiry 29(1): 101–114.

[2] Klier, Thomas and Joshua Linn. (2011). “Corporate Average Fuel Economy Standards and the Market for New Vehicles.” Annual Review of Resource Economics 3(1): 445-462.

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