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waste in agricultural production by eliminating farm programs would
face strong political opposition.
The greater the improvement in the information communicated and
the more waste reduced by eliminating these programs, the more intense

the political opposition would be.
Corporate Average Fuel Economy Standards
Corporate Average Fuel Economy (CAFE) standards are

politically imposed mandates on the average gas mileage that different
categories of vehicles sold in the United States have to meet. In
December 2007, Congress passed and President Bush signed legislation
with the comforting title, the Energy Independence and Security Act of

2007, which increased CAFE standards to 35 mpg for cars and light
trucks by 2020 from the previous requirement of 27.5 mpg or cars and
22.2 mpg for light trucks. The stated justification for CAFE standards is

that they are necessary to force consumers to drive vehicles that reduce
our dependence on foreign petroleum by getting better gas mileage.
Unfortunately, these standards suppress information essential to making

sensible transportation decisions.
Market prices and profit margins have until recently been higher
on SUVs and trucks than on smaller vehicles because CAFE prevented

car companies from increasing the supply of the larger vehicles. This
hampered the ability of consumers to communicate information on how
much they valued the tradeoffs between safety, comfort, convenience,
and better gas mileage and the ability of automobile suppliers to

communicate information on the cost of responding to consumer
preferences with different types of vehicles. The result is that resources
have been used to produce products that were less valuable than the

larger vehicles that could have been produced, and no one knows how
large this waste of resources has been.
CAFE standards have further distorted the two-way
communication of information between consumers and automobile

manufacturers with special-interest legislation that has nothing to do
with saving petroleum. For example, the American Jobs Creation Act of
2004 created a large tax break on SUVs if they were used in small

business (see Power 2003). This break was then eliminated in 2007 with
the passage of the Energy Independence and Security Act, but we can
expect Congress to come up with creative new ways to soften the effects

of CAFE standards on selected special interests as the new standards
make exemptions and loopholes even more valuable.