Yahoo Answers is shutting down on May 4th, 2021 (Eastern Time) and beginning April 20th, 2021 (Eastern Time) the Yahoo Answers website will be in read-only mode. There will be no changes to other Yahoo properties or services, or your Yahoo account. You can find more information about the Yahoo Answers shutdown and how to download your data on this help page.
Trending News
Free Markets: Obama's CAFE standards & OPEC?
[If you believe free markets are most often the best answer:]
Are car fuel efficiency standards a good idea from a free market perspective -- forcing everyone in the nation to spend more money in the short term to cut their collective demand for oil?
Do you think that OPEC's cartel benefits OPEC?
My first gut feeling is that CAFE standards will be seen as a bad idea from a free-market perspective and be something that the WSJ will oppose, and OPEC or other cartels (if you can get away with creating one for what you have to sell) are obviously good for the participants... what's the difference?
Thanks Simplicitus --
"Obviously, the OPEC countries formed the cartel because it was in their own interests to do so."
I was hoping for more of a theoretical defense of free market theory by someone who believed in it more strongly, which I don't think either of us do.
I have troubles picturing my economics professors or Republican representatives saying "Obviously, the US and her allies instituted car fuel efficiency standards because it was in their own interests to do so." [Reducing demand & thus reducing price, the converse of OPEC reducing supply and increasing price.]
So, even ignoring environmental impacts, shouldn't the US be taking steps to reduce demand for limited resources like oil held by other nations? Why isn't CAFE just the converse of an oil cartel -- good economic policy for the US and very far from free market ideals at the same time?
1 Answer
- simplicitusLv 71 decade agoFavorite Answer
1. Obviously, the OPEC countries formed the cartel because it was in their own interests to do so. OPEC's actions are guided solely by what they see as being in their best interests.
Whether their perceptions are accurate is another matter entirely. I'm sure all those banks that failed thought they were acting in their own best interests as well.
2. I'm sure you are right that the WSJ will oppose CAFE standards as they've opposed so many other rules and regulations. And some Republicans have already lambasted the agreement citing that it violates Americans G-d given right to drive gaz-guzzlers and to pollute.
On the other hand, it is the success the business and banking communities had in convincing Congress-critters, the Federal Reserve, the S.E.C. that the derivatives market should be free of regulation that caused the recession that we are in now.
There is no doubt that many on the WSJ staff are intelligent. There is also no doubt that they do not have the best interests of the country in mind.
3. As the current recession shows, the free market, left unregulated, is often going to cause massive damage. Even the most ardent free-marketeers, if they are honest, recognize the existence of externalities - relevant factors the markets do not take into account.
Clearly, global warming is such an externality. Whether CAFE is the best way of dealing with it is open to question, but that the government has a right and a responsibility to take action w.r.t. externalities is not in question.
4. Furthermore, it is clear that the American auto industry has been deemed (wisely or not) "too important to allow to fail". Since they have not managed to compete successfully for decades (just look at the inroads that the Japanese, the Germans, and, more recently, the Koreans have made into the U.S. auto market), they couldn't be allowed to continue on their own without massive risk of their failing.
None of this is to say that the government always knows better than the market. That clearly isn't true either. But just as cutting someone open with a knife can be for good or ill (assassin vs. surgeon?), so can government action. And insisting on principle, such as that the market is always right, is myopic to say the least.
