The new CAFE standards announced by President Obama have generated an interesting article in Financial Times by John Gapper. He notes that the CAFE standards killed large cars in America but helped create the SUV. Unintended consequences once again. He makes the case economists often make that a more efficient way to reduce oil consumption is to tax it--in this case, by a large, European-style gas tax. Gapper writes:
"Instead of the simplest, most obvious and least expensive way of achieving that end – raising the national excise tax on petrol – the president was again relying on a complex, dirigiste intervention."
It is likely, as Gapper notes, that Congress would never pass such a tax. It certainly wouldn't be popular among taxpayers and voters. But, given Obama's popularity, why not tackle something difficult instead of easy things like increased spending, something most politicians and voters like. I am getting the sense that the new administration prefers dirigistic approaches since such approaches rely on the wisdom of the regulators rather than relying on people responding to market forces.