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Tuesday, May 8, 2007

Mankiw's Misleading Memo

Part of Mankiw's defense for a gas tax comes from an old CBO report from 2004 which compares the benefits and costs of CAFE to a gas tax. They confirm that a gas tax could cost less than CAFE. ... That conclusion came from the old CAFE model. The model has since been reformed.

I wish Mankiw would stop pushing that out-dated CBO report (from 2004). The entire CAFE model has been revised since then and is in the process (end) of a major overhaul. This overhaual makes that report useless and outdated. I'm waiting for a new CBO report.
Read more here: CLICK ME

Or, for a point by point about what reformed CAFE means for efficiency: CLICK HERE

I'm not saying I think CAFE is THE only way to go, but I am saying that Maniw's use of the old CBO report is misleading. In fact part of the reason for the push of the overhaul was due to this old report. Shame on Mankiw for presenting only partial facts.

1 comment:

jimcaserta said...

The CBO authors present an unsupported claim that cars will be more expensive with increased cafe standards. They have a footnote that then says, maybe costs will stay about the same:

"Alternatively, producers could comply by raising the prices of their gas-guzzling vehicles and lowering the prices of their most fuel-efficient cars to encourage consumers to buy more of the latter, in which case consumers would still see higher vehicle prices on average. Or producers could offer new vehicles that provided better fuel economy in place of other attributes that consumers might prefer, such as additional horsepower or more interior space, in which case prices might not increase."

However, CAFE standards have been increased in the past. Wouldn't it be at least marginal due diligence to look at past events to see if their hypothesis bore out?

Macroeconomics is the sum of many individual microeconomic decisions. If increased cafe standards cause Honda to give incentives for a CRV over a Pilot, I don't see how there is net more money spent on cars. I doubt if the CBO paper would ever pass peer-review.