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Why They Do That?

Obama is quick to jump on commercial fleets of fuel efficient vehicles as a great thing and say the government should do likewise. Of course they are a good business thing. But are they right for government? Maybe, maybe not.

You need to look at why business has bought into hybrids and other fuel efficiency schemes before asking if it is right for the government to do. Remember smart businesses won’t spend unnecessarily.

1. The company has a consumer base that will react to the use of fuel efficient vehicles in a positive way, without regard to price effects.

2. The company has a consumer base that will react positively to a decrease in prices, without regard to any environmental effects.

3. The companies profits will improve without regard to consumer actions, the price of business gets cheaper even though nothing has changed for consumers.

4. None of these things might be true and it might cost more and be more polluting to use these vehicles. In which case it makes sense not to do a damn thing.

It may be a combination of them as well. I for one, don’t care about the costs to the environment, let me rephrase a bit: I feel that price increases are a bigger cost than the environmental effects.

For my business, as it is driving, it makes sense for me to use fuel efficient vehicles. I’m not lowering costs for the consumer nor am I going to advertise that “we are using less gas to drive more this year!”. My consumer base would care about cost, but not as much as I care about profit and I doubt they would give a damn if the cars were powered by burning baby seals. My business is in category 3.

But we are talking about the US Government if I remember correctly.

1. The environmental effect isn’t going to increase revenues and the government has a monopoly on being the government, so consumer choice isn’t an issue. Some people may be happy about lower environmental effects, but that kind of sanctimony tends to disappear when taxes go up or service go down as a result.

2. If taxes were to go down, more people would be happy, but we know that won’t happen. Chances are better that any gains would be rolled into a different program and therefore increase government services, so this one is a possibility. More services per dollar of taxes, same thing as a price drop.

3. With the government, this category ends up being the same as above, the government doesn’t worry about profits.

So the decision about whether or not the government uses more expensive fuel efficient vehicles or cheaper vehicles that cost more to operate comes down to only cost savings. At least if we really believe the government works as it should. (that is it cares about spending our money wisely and in ways that make us happier.)

It appears to be costing more (4), so I’m not convinced the government should be doing anything with hybrids and such.

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