Wednesday, August 31, 2005

Professor Ted Gayer Guest Blogs on CAFE

Ted Gayer, a former colleague of mine at CEA, an Associate Professor of Public Policy at Georgetown, and a Visiting Scholar at AEI, takes a turn guest-blogging on CAFE:

Since I’ve done some research on light trucks, Andrew has graciously allowed me to throw in my two cents on the new CAFE standards. I’ll take the invitation as an indication that he has forgiven me for any headaches I caused him while working under him at the CEA.

As Andrew pointed out, one of the odd things about the new CAFE standards is that they create six categories of light trucks (based on wheelbase multiplied by track width), with the standards becoming more lax for the larger categories. So now there’s an incentive to build larger light trucks. (To DOT’s credit, by reducing the discrepancy between the CAFE standard for cars and the standard for small light trucks, they did reduce the incentive to make the latter rather than the former.)

Why would DOT want to provide an incentive to build larger light trucks? One reason is because of John Graham, who is the Administrator of the Office of Information and Regulatory Affairs (the OMB office that oversees regulatory matters). John has long argued that increasing CAFE standards leads to down-weighting, and that down-weighting leads to more traffic fatalities (see his 1989 paper with Robert Crandall in the Journal of Law and Economics [link via JSTOR]). The Crandall and Graham paper finds evidence of down-weighting, and they link these findings to work by Leonard Evans [link via ScienceDirect] which suggests lighter cars lead to more fatalities.

All of this is eminently plausible, yet I have a few quibbles with using this work as a justification for the structure of the new CAFE standards. First, the original Evans work (from the early 1980s) was focused on cars of different weights, and did not consider light trucks (there were so few data points back then for light trucks). While it may be true that two light cars crashing results in more fatalities than two heavy cars crashing, this is not directly generalizable to the case of two light trucks (which are heavier and larger) crashing. But my bigger quibble is that the Evans research examines the total fatalities that occur, given that a crash has taken place. In a world of only cars, this type of analysis makes sense, because there is no a priori reason to think that heavy cars are more crash prone than light cars. But given the higher center of gravity of many light trucks, and the different and conflicting sightlines they present, there is some concern that light trucks are indeed more crash prone than cars.

I looked at this issue in my 2004 Journal of Risk and Uncertainty article. First, I confirm the findings of Crandall and Graham as applied to light trucks. That is, given that a crash has occurred, we can expect more fatalities if the crash involves two cars than if it involves two SUVS. (Interestingly, I find that a crash of two pickups is worse than a crash of two cars.) Another way of saying this is that the safety advantage of being in an SUV rather than a car dominates the additional risk that the SUV rather than a car poses to the other driver in the crash.

But then I estimate the additional crash risk posed by light trucks relative to cars. This isn’t an easy task, since one must consider the likelihood that more reckless drivers select into light trucks relative to cars. I address this by using snow depth variation by states. It turns out that states with higher annual snow depth tend to have more annual light truck driving than car driving. I then use this variation to look at relative crash frequencies in summer months (when snow depth doesn’t play a part). I find that, indeed, the additional crash risk of light trucks cancels out the safety advantage they pose when in a crash.

So what’s it all mean? By creating an incentive to build larger light trucks, the new CAFE standards will likely not achieve their goal of protecting drivers’ safety. Aside from this, I should point out that I agree with Andrew: the pertinent regulatory issue is not the total fatalities resulting from the mix of vehicle types. A consumer can decide for herself how much to spend for a safer vehicle. What she can’t decide is how threatening a vehicle other people should buy.

I do think there was another reason for the structure of the new CAFE standards. U.S. automakers make larger light trucks than their foreign competitors, so a uniform light truck CAFE standard hurts domestic automakers. I think this gets at Andrew’s concern that CAFE standards are not transparent: here’s an example where they can be used for protectionist purposes. So I throw my hat to the politically implausible goal of scrapping CAFE and replacing with a higher gas tax.

Thanks to Ted for guest blogging. When in doubt, consult an expert!

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