Regulation and Scandal

With VW’s emissions cheating scandal, some have argued this proves the free market cannot be trusted and regulations are necessary.  But, I wonder if the cheating is an effect of the regulation, rather than regulation the effect of cheating.

The following is purely speculative on my part.  I am unaware of any studies done on this one way or the other.  But here’s what I am thinking:

The governments created auto emissions. All vehicles needed to pass those standards to be sold. VW knew their vehicle(s) didn’t pass the standards but had to falsify the records in order to sell them. If those standards didn’t exist, VW could have been open about the actual emissions rather than hide it.

To be fair, it certainly is possible, perhaps even probable, that VW would have lied regardless.  Liars rarely change their stripes.  But the incentive to lie may have been lesser if the regulations weren’t there.

14 thoughts on “Regulation and Scandal

  1. The governments created auto emissions.

    That’s right. No such thing existed before government invented them, now every car seems to have some level of undesirable emissions. 🙂

    If those standards didn’t exist, VW could have been open about the actual emissions rather than hide it.

    Without government standards, emissions might or might not be of interest to auto buyers, if buyers routinely bought vehicles with low emissions, perhaps based on independent testing company data, manufacturers would make more of them.

    The “Big 3” US automakers learned that lesson in the ’60s and ’70s when they lost sales to Japanese brands that offered cheaper, more reliable and more fuel efficient cars.

    I would guess that market forces have driven more of the improvements over the years than government regulations, which are often requested by auto makers, despite their phony protestations.


  2. Well, it is true that if there are no rules then there is no violation of those rules that don’t exist.

    It is NOT true that VW “had to” lie to sell their cars. They knew perfectly well how to sell cars and how to pass the test. They lied because lying allowed them to sell additional cars that many consumers wouldn’t have bought if they had been told the truth. That was unfair to those consumers and to VW competitors who told the truth about their own products.

    The emissions rules are all about reducing air pollution. Pollution is a classic externality. People who “voluntarily” choose to pollute are imposing costs on other people, many of whom would not accept those costs if they had a voluntary choice in the matter.


  3. Greg

    I’m somewhat disappointed that I can find nothing of substance to disagree with in your comment. I would only add that: ” They lied because lying allowed them to sell additional cars – AT A LOWER PRICE – that many consumers wouldn’t have bought if they had been told the truth.”

    Obviously the technology exists, but at a higher cost per vehicle. The good news, from a reduced emissions standpoint, is that road testing will probably be part of the certification process for TDI vehicles in the future.

    The bad news is that the additional testing and compliance costs will make those cars more expensive in the future.


  4. Ron,

    I want to introduce a totally off topic subject. I am assuming that, you are still checking back and Jon will indulge us. I thought about doing it on CD but I don’t want to have to deal with morganovich freaking out about being sidetracked which might actually be a legitimate complaint in this case.

    Today there is a long video on EconLog of a debate between Heumer and Richard Epstein. This was of interest to me because Epstein is a formidable debater and Huemer is the all time champion in your view for stating the anarcho-captalist position (after recently having replaced Spooner) in your view. You won’t want to miss it. I found it fascinating and also bizarre at points. To some extent they talk past each other because Epstein is making a consequentialist argument and Hemmer is making a moral argument.

    Also interesting is the method they use for deciding a winner. The audience is first polled on their views and then the one moving the most people off their views at the end is declared the winner. As with all voting methods there are some problems with this one. The debator with the larger pool of possible converts would have an advantage. That would seem to favor Heumer since nacho-capitalists are rare even among self described libertarians.

    But some audience members may well cheat. They are doubtless mostly familiar with these arguments and may take an initial position with the predetermined intention of moving later to favor their guy. I think the hosting group was some kind of mostly Randian organization. I don’t think they are anarchy-capitalists.

    I am interested to know what you think of it. Epstein was declared the winner by the mostly libertarian ( but not probably an-cap audience). I’ll write a bit more later on my reactions to the debate.


  5. Oops. Some obvious misspellings there. Didn’t I tell you recently you wouldn’t have to wait long for more of my typos Ron? I am blaming most on spell check which does not recognize anarcho-capitalism and forces me to correct from anarchy-capitalist every time. We can at least dream that the movement may grow enough to one day get past spell check.

    Likewise for the correction to nacho-capitalists which sounds much more delicious than anarchos do. Hemmer is also a spell check default. I may need to up my game with proofreading.


    • I think we can all agree on nacho-capitalism. 🙂

      My problem was with my old Droid Razr that combines auto-complete with spell check. It’s both or neither. I only use it when I have no other choice. I decided I was better understood with misspelling than with random, unrelated words.


  6. So far only three comments on this debate on EconLog. More comments on it here already actually. The thing has been virtually ignored on a blog run by Heumer’s biggest fan Bryan Caplan.

    There were some weird moments. Heumer responded to a question about how an-cap would deal with nuclear weapons by simply claiming that we would just “dismantle” all the nuclear weapons before we dismantled the governments. This is almost self-parody. He deals with the problem by simply assuming its solution. Counterfactuals sure are easy when you get to make stuff up.

    I thought Epstein really scored when he said,”Decentralized use of violence is not the same as decentralized use of market forces.”

    Heumer relied very heavily on claiming that because most violence and war fails a rational cost benefit test, we don’t need to worry much about it. That shows a shocking lack of knowledge about the extent to which wars and violence have been based on emotion rather than cost/benefit analysis in actual human history.

    Epstein advocated an aggressive neocon foreign policy including pre-emptive war with Iran as soon as possible. Apparently the NAP doesn’t apply to foreign policy at all in his world. It was all entertaining yet very weird in my opinion.


    • I was disappointed in the presentation for several reasons, the most important being the poor sound quality. It’s too bad the organization couldn’t afford a real sound engineer and maybe even an actual videographer. I’m hard of hearing and found the Q&A audience questions particularly hard to follow.

      It was obvious, but not surprising, that Epstein is a better debater than, well, just about anybody, and I thought Huemer did rather poorly, especially in the Q&A.

      I was also disappointed that there was nothing new or convincing from either one of them. I heard all the standard arguments in favor of monopoly government and the standard ancap responses, with little explanatory detail.

      I haven’t considered Epstein to be a libertarian, but his strong neocon views surprised me. Apparently he considers preemptive destruction to be some legitimate form of defense.


  7. Yup. Epstein came off like a warmongering conservative. He kept citing game theory as why we should go to war with Iran now. If Heumer was a better debater he would have pointed out that those same game theories would have had us launching nuclear attacks on the Soviet Union and China in the 50’s or 60’s. Maybe Epstein thinks we should have done that.


    • Sometimes those cerebral guys like Epstein forget there are actual people involved in these “games”.

      I’m not as pessimistic as Huemer about nuclear annihilation. Although it’s been a short time historically, there’s only been one (well, 2) uses of nuclear devices in war, and that was when only one country had them.

      I would like to think the doctrine of mutually assured destruction is a real thing,and that the number of weapons now in existence and the relatively large number of parties possessing them creates an insurmountable deterrent to first strikes.


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