Pollution is a classic negative externality, but safety (for car occupants) is a benefit mostly realized by car buyers. But let's think through the incentives. Ford is in the business of selling large, complex transportation machines. When you shop for a car, the dealer encourages you to add options like all-wheel drive, premium sound, the sports package, and a bigger engine. Ford makes more profit when it sells more equipment with the car. If enough customers demand a refrigerator in their car, manufacturers will provide them. Why would Ford be opposed to adding emissions control equipment to a vehicle? Ford is interested in making profit, not pollution. The primary reason Ford would be opposed to putting emissions equipment in cars is that customers don't want to pay for it. --from an International Council on Clean Transportation report published in 2012. Euro 6 standards took effect in 2014. If customers demanded emissions controls (and were willing to pay the cost), manufacturers would already have incentive to provide them. Rational customers might calculate that the air they breathe won't be noticably cleaner if they pay for emissions controls but most other people don't, so it's not a worthwhile expense for them. If they knew everyone else would also buy the controls if they do they might (or might not) decide the benefit is worth the cost. Legislation is a way to solve this coordination problem (making people internalize the cost of their externalities), by forcing everyone to buy cleaner cars. Like anything else, this approach has pros and cons. That sounds like something a model would predict... and it's not entirely irrational. The short term is more predictable than the long term. Spending money now, or buying on credit, means you will definitely get to enjoy the product. I save in a retirement fund, but there is some risk that I won't be around to enjoy the savings, or some misfortune will make the funds unavailable when I want them. Spending resources today to reduce the risk of a catastrophe in 100 years could be a mistake if (1) the catastrophe happens anyway or (2) some other catastrophe happens or (3) some unforseen innovation would have averted the catastrophe at much lower cost. Agreed, no model is perfect. If you want to understand and predict human behavior, you can make random guesses or use an imperfect model. An assumption like "when stuff costs more, people buy less of it" is reliable enough to have some predictive power. The rational-actor model isn't a libertarian concept. Any model is a simplification, the idea is to reduce the complexity of the universe to make it more comprehensible. The question is how accurately the model represents reality; behavioral economics has been challenging rational choice theory recently. Back on topic: Caplan holds libertarian views. Does that mean that when he asserts that (1) tech companies produce great benefits and (2) people mostly complain about tech companies, he must be wrong because libertarianism is also wrong? That's the feeling I got from the responses here.Car manufacturers have no real incentive to maintain emissions standards or follow safety regulations, but we created those things because they were negative externalities.
For example, the cost of taking a 4-cylinder 1.5L gasoline engine from no emission controls to the most stringent proposed EU standard (Euro 6) is around US$360, whereas the cost of taking a 4-cylinder 1.5L diesel engine from no emission controls to Euro 6 standard is around $1400.
The problem is humans will usually always choose short term convenience over long term consequences
Regarding the model - I don't think any model is ever going to really work.
My main beef with libertarian economic theory is it feels like a simplification of reality much like Marxism is.
That's because you're trying SO HARD to get that feeling. You absolutely refuse to acknowledge that the article "solves by inspection" a dozen different things that absolutely no one else considers solved. Car manufacturers sell cars on the selling points that matter to consumers. In the '90s it was cup holders. In the '80s it was a commanding view over the road. In the '70s it was "please god can we return to the '60s despite these horrible emissions standards." You act as if consumers buy cars based on their emissions levels when even the EPA just insists they pass. All the ZULEV PZEV bullshit the manufacturers slap on the back are poorly-defined terms created by the California Air Resources Board, not the EPA, and they're not something you test for. Most consumers want the best performance they can get that abides by the laws they believe in and don't concern themselves with minute decisions influenced by driving habits beyond pass/fail. That whooshing sound is you blasting by #dieselgate as if it isn't there.That's the feeling I got from the responses here.
