Energy Regulators Think You're Crazy

Federal regulators evidently believe that Americans are irrationally choosing to spend hundreds of billions more on energy than they should. Consequently, benevolent bureaucrats have imposed regulations to guide hapless consumers toward making the proper energy saving choices when it comes to purchasing cars, air conditioners, clothes dryers, refrigerators, and light bulbs. A new study finds that the regulators are, in fact, the ones being irrational.  In recent years, the Department of Energy (DOE), National Highway Traffic Safety Administration (NHTSA), and the Environmental Protection Agency (EPA) have been imposing energy efficiency regulations of various sorts on Americans. In a new working paper, "Overriding Consumer Preferences with Energy Regulations," Brookings Insitution economist Ted Gayer and Vanderbilt University economist Kip Viscusi look for the market failures that DOE and EPA regulations are supposedly addressing and do not find them. Instead, they find blinkered agencies ignoring important aspects of products that consumers value in their single-minded pursuit of energy efficiency. Instead of seeking to ameliorate market failures, the agencies largely justify the costs of their energy conservation regulations by asserting that Americans are irrational. Specifically, consumers are supposedly incurring huge welfare losses because they myopically undervalue future energy costs when they purchase various consumer durables, e.g., cars, clothes dryers, refrigerators, air conditioners, and the like. This means that rational and benevolent regulators know better and must force Americans to change their choices for their own good...more