Government Efficiency Mandates Harm Consumers

March 21, 2013

The initial rollout of Boeing's new 787 Dreamliner fleet has been halted following a series of fires within the plane's battery system. The problem with the new lithium-ion batteries, designed to reduce weight and increase efficiency, will likely require a substantial investment from Boeing to iron out the problems. New technologies are prone to unforeseen costs and should not be mandated in the name of efficiency, says the Washington Times.

  • The Obama administration has promised that there will be new energy-efficient mandates during the second term.
  • Bipartisan support for the new efficiency mandates are likely from legislators who listen to witness after witness describe cost benefits to consumers and manufacturers.
  • All of these calculations on the savings from complex new efficiency technologies fail to account for the high costs of development and likelihood of failure like Boeing has experienced.

An example of a poorly thought out efficiency mandate is the corporate average fuel economy (CAFE) standard for automobiles, which pushes auto manufacturers to increase the gas mileage. In order for manufacturers to accomplish this goal, they must make cars smaller, lighter, more expensive and less safe -- a tradeoff that few consumers are willing to make.

  • In general, businesses and consumers appreciate efficiency because it lowers cost in the long run.
  • For Boeing, it may have simply made the wrong choice in choosing which battery to equip the new 787s with.
  • In the free market, Boeing's competitors should be unrestricted in offering their alternative to Boeing's offering.

However, bureaucratic decisions at the federal level are the wrong approach to improving efficiency in the private the market.

  • The Environmental Protection Agency has expressed that it intends to regulate every aspect of energy use to reduce carbon emissions.
  • If the government mandates certain technologies or efficiency standards, manufacturers may force consumers to make sacrifices in safety to meet these efficiency goals.

Source: David Kreutzer, "Dreamliners and the Hidden Cost of Efficiency," Washington Times, March 13, 2013.

 

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