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RMA laws may be swell for established car dealers who don't want any new kids on their block. But, as with other "market-entry restrictions," they're not so great for consumers. According to the report, which is based on a study of 1978 sales of Chevrolets in 13 states, RMA laws hurt car buyers in at least two ways: those who buy cars pay more for them, and others are priced out of the market altogether. These effects are especially strong in areas with growing populations.
For example, in places studied where the population had increased since passage of the law, buyers paid anywhere from 3.7 percent more for a Sport van to 16.8 percent more for a Corvette in 1978 than they would have without the law. Not surprisingly, Chevrolet sales fell by nearly 5 percent that year.
What is the total cost of these regulations to automobile consumers? The FTC researchers extrapolated their findings to all car makes and to all 36 states that had RMA laws in 1983 and estimated that consumers spend about $3.2 billion per year (in 1985 dollars) for current RMA laws.
Maybe the report will help put RMA laws on the road to repeal.
Earning to Breathe Free
John Palmisano makes money out of thin air.
As a regulator at the Environmental Protection Agency in both the Carter and Reagan administrations, he tried to promote market-oriented ways of cleaning up the environment. Now his company, AER*X, is helping to develop the growing market in "emission reduction credits," or ERCs.
An ERC is created when a manufacturer in an area that doesn't meet federal air-quality standards-Los Angeles, for example, or Northern Jersey-does something to reduce its output of air pollution. The company may, for instance, shut down a plant or install pollution control equipment that is better than what is required by law.
The market enters the picture when another company wants to build or expand a plant that will pour new pollution into the skies of a "dirty air" locale. Before this company can get a construction permit, it has to either reduce its own pollution at another factory or buy an ERC from another manufacturer. Rather than just forcing all companies to abide by the same pollution standards, as most regulations do, the ERC market rewards companies for reducing pollution while requiring plants that add to local pollution to bear the cost.
"If you're going to be emitting 100 new tons of pollution into the air, you have to get at least 100 tons from someone else," Palmisano told REASON. AER*X, founded in 1984, helps clients find and buy credits; it also keeps track of what prices ERCs are going for in different parts of the country and maintains a database of people who trade the credits.
For example, when Sundance Spas, a maker of fiberglass hot tubs in Chino, California, wants to expand production, it hires AER*X to locate the ERCs it needs. Last year it bought credits allowing it to emit an extra 204 pounds of pollution a day. The price: a steep $40,000. "I spend a lot of time shopping for ERCs," Sundance's president Ron Clark told Science 86. "For us, they are a matter of life and death."
For his part, Palmisano hopes the success of a market in pollution credits, which he says "have saved companies hundreds of millions of dollars," will encourage regulators to apply market techniques to controlling other forms of pollution. "Reasonable men who disagree can get together and work out a system that will save billions of dollars and still reduce pollution," he says. And that will let us all breathe a little freer.
- Water pricing downpour. The World Resources Institute is calling for raising urban water rates, allowing farmers to sell water they don't use, and encouraging states' trading of water. The market-oriented suggestions closely follow a policy proposal recently adopted by the Western Governors Association (see Trends, Oct.).
- Freedom frontier. Congress has approved a bill extending privacy protection to our era's new forms of communication-electronic mail and cellular telephones. The legislation updates the landmark wiretapping law of 1968.
-Robert W. Poole, Jr., Lucy Braun, Bill Kauffman, and Virginia I. Postrel