For a great look at using economics attempting to solve environmental problems, read Vicki Ekstrom High’s article on University of Chicago professor Ryan Kellogg’s research.
Kellogg has developed an approach to using a “market” approach to developing fuel efficiency standards, based on the cost of gasoline. So, when the cost of gasoline is higher, the fuel efficiency standards would go higher with the assumption that consumers would purchase more fuel efficient vehicles.
If the gas prices are lower, the fuel efficiency standards will go down as consumers are likely to purchase larger “gas-guzzlers.” The assumption then is that it would not put undue burden on auto makers to develop cars that might very high standards.
Based on Kellogg’s research the market will develop an optimal response to this that maximizes fuel efficiency in times of high gas prices while not straining the auto makers in times of low gas prices to achieve high emissions standards that are mismatched to consumer preference.
Kellogg suggests that this “Fuel Efficiency Index” approach (my nomenclature) provides a better response than the current system which is based on wheel base size and does not require congressional legislation.
According to Kellogg”…. it provides the maximum benefit to consumers and the general public by reducing greenhouse gas pollution at the lowest possible cost.”
Teachers of Economics, Ecology, Automotive Engineering would find this research worth sharing with their students.
Questions for Discussion
- Why does Kellogg’s research provide a better solution than the current system?
- What assumptions are imbedded in Kellogg’s research?
- What data do you think professor Kellogg used to develop his new solution?
- What are the fluctuations in gasoline prices noted in the graph in this article?
- Over what period of time would this Fuel Efficiency Index need to cover to be practical for automakers and consumers?
- How would this solution be implemented?
- If you were a policy maker, what other data would you want to analyze before agreeing with professor Kellogg’s Fuel Efficiency Index?