As economists, one of our chief focuses is on effeciency. Economics is, after all, the study of allocation of scarce resources. Why, then, do so many free market economists like myself oppose effeciency standards like C.A.F.E? It’s not out of some dogmatic mantra that government can only harm but rather out of objection to a poor definition of effeciency.
The political definition of effeciency is “to use fewer resources.” This is partly correct, but there is another part. The economic definition is “to maintain or improve output using fewer resources.” Therein lies the rub. To use fewer resources is easy. A firm could use less labor if it fires half its workforce. A dishwasher could use less resources by spraying plates with a trickle of water. I car could use fewer resources by cutting back on features. But all of these methods represent a decrease in standards of living.
True effeciency gains lie when output is increased or maintained. Cars today can run a/c, radio, and GPS while releasing less carbon emissions. LED lights cast more light while using less electricity. Computers have greatly increased labor capabilities.
The problem with government mandated effeciency standards is that they do not take into account increased standard of living. Low flow toilets, for example, use less water but are more prone to back ups or require multiple flushes. Diswasher energy standards and soap regulations have reduced the ability of washers to clean. These represent a decrease in living standards. By focusing on only half the issue, government standards will continue to only half achieve its goals.