How bad a tragedy is the Volkswagen fraud?

The NYT symposium is here, including Robert Reich, Dan Ariely, and myself, among others.  Here is my piece, excerpt:

One plausible estimate suggests this additional pollution has been killing 5 to 27 Americans each year, with that number worldwide reaching up to 404 as a maximum.

To put that number in context, the World Health Organization estimates that about seven million people die each year worldwide from air pollution. Even within the United States, early deaths from air pollution have been estimated to run about 200,000 a year, in comparison to which the losses from the Volkswagen scandal are a rounding error. For the American deaths, however, the culprits are often cars, trucks and cooking and heating emissions, so there is no single, evil, easily identified wrongdoer at fault. As Pogo recognized, often the real enemy is us.

Here are alternative estimates of the death from Volkswagen, published after my piece was set to run but the comparisons do not change fundamentally.  From that same article here are two paragraphs of note:

Don Anair, deputy director of the vehicles program at the Union of Concerned Scientists, said the precise effect of the Volkswagen fraud would require intense and complex computation.

Still, he cautioned against taking the view that the Volkswagens have reversed the progress with pollution from automobiles. Since the standards went into effect from 2004 to 2009, he said, emissions of nitrogen oxides have been 90 percent lower. “It’s not like this is going to offset the majority of the benefits of these standards,” he said. “But there will be some impact, and we need to get a better handle on it.”

“Since the standards went into effect from 2004 to 2009, he said, emissions of nitrogen oxides have been 90 percent lower.” is a sentence which I fear will not receive much attention in the current debate.

Comments

Evidently Cowen believes capitalism can operate without trust, which is brave.

He's playing the crowd that cares about the environmental impact and not the defrauding customer aspect.

Gaming government metrics is defrauding customers like the ACA releasing weird data like "plan put into a shopping cart" or "jobs created or saved" are defrauding voters.

Unless you really, really care about NOx emissions.

The principle might be more important...what else are they lying about?

who buys cars Harun? is it government metrics?

No, no, that not's really the same thing at all. Obviously.

Volkswagen made tiny error so they must be destroyed. But Jewish bankers plunder Trillions, and they must get Trillion$ in bailouts. this is not left vs right, legal vs illegal, GOP vs Dems, Socialism vs liberty. This is war on White people.

Why do hostile elite defend Israel as a Jewish ethnostate with Jewish only immigration, but ravage White majority Europe/North America into a multi-ethnic, multi-cultural Gulag with non-White colonization?

The world is 91% non-White, only 9% White. But non-White colonizers are aggressively annihilating gullible Whites, just as China annihilates Tibet.

How long will gullible Whites cuckold for murderous anti-White elite, who suppress our fertility, plunder White jobs/wages/guns, infiltrate/subvert our banks/FBI/CIA, indoctrinate White kids in academia/mass media & butcher White soldiers in bankrupting wars?

"Native" Americans invaded from East Asia. Yellow & Brown races committed 10-times more genocide, slavery, imperialism than Whites. Since Moses, Whites have been victims of Jewish/Crypto-Jewish, Muslim, N.African imperialism, slavery, genocide.

Gullible Whites should reject subversive ideologies- individualism, feminism, sexual liberation- & hostile slanders of racism. Peace to all humanity, but White people must organize to advance their interests, their fertility, their homelands. Copy & spread this message. Reading list: http://goo.gl/iB777 , http://goo.gl/htyeq , http://amazon.com/dp/0759672229 , http://amazon.com/dp/1410792617

We already have Steve Sailer we don't really need any more white nationalists

We live in a multicultural society, don't we? So that's what we get. Don't pout.

To be fair, most Jewish people are white.

To be fair, Steve Sailer is smart, and I can learn from people with whom I (mostly) disagree if they are smart.

I cherish diversity, but I think this is one bit of diversity we'd be better without.

"anti-White" is code for "I code brainwashed into being a white supremacist but perhaps don't know it it".

People are people.

People are people.

A lot of Americans believe this. Most other people in the world do not.

Do Jews believe "people are people?" Do Chechens? Georgians? Tibetans? Han Chinese? Mongolians? Vietnamese? Scottish? Hutus? Tutsis?

Why isn't all of Central and South Hispania just one giant country? People are people.

"Why isn’t all of Central and South Hispania just one giant country?"

History.

Why isn't all of Europe one country?

History.

Volkswagen commits massive fraud so it's only natural to attack Jews. I don't think we need to read Kevin McFuhrer to understand your logic.

We badly need to start locking these criminals up and that means starting somewhere. If VW has to be first, so be it so long as we then move on to the baqnksters.

"Evidently Cowen believes capitalism can operate without trust, which is brave."

Trust is required for capitalism to operate effectively and rule breakers have to be punished. Tyler is wrong about this one.

Just as a counterpoint, countries like China often have rules on the book specifically to punish who they want to punish, via "prosecutorial discretion."

I'll give a real life example from Taiwan. When Costco wanted to open its Taichung store, it was forced to follow rules about parking availability that while on the books were never required for domestic retailers. Costco had to have a large parking lot across the street that cost a lot of money.

Last time I was there that parking lot was gone, suggesting that they eventually found the right palms to grease, and thus could offload the very expensive real-estate. But should they have been "punished" for rule breaking when no one else is, or the rule is arbitrary?

There is also an effect when regulations become ever stricter to the point of silliness. California Prop 65 signs in the Cheesecake Factory, or CARB rules on chemicals that are so low as to be currently impossible to produce.

The constant pushing of benchmark metrics to unreasonable levels leads those with technical knowledge to view them as unserious and thus morally okay to break.

There was a funny case where lawmakers legislated pi to equal 3.2. Would we all be for "punishing" companies that refused to follow that metric?

Still, VW case does seem more egregious.

I want to be clear, I'm devils advocating here, not saying VW isn't in the wrong and shouldn't be punished.

Effectively you are conflating two issues here. 1) the emission rules may well be too strict and 2) a company was caught willfully breaking the rules and lying about it.

Regardless of the merit of the underlying emission rules, this was the benchmark that other car companies were operating under and VW's customers expected their vehicles to be legally compliant. So, even if the emission rules should be loosened, VW should be punished for its corporate misbehavior.

+1

But it sucks to be the company that proves the rule unwise...

But, to Harun's point, eventually we get to the point where the CAFE and other emissions standards are simply un-reasonable, and impossible to meet. They also can have pretty glaring loopholes and unwanted side-effects (has anybody compared VW's NOX emissions to the NOX emissions coming from that coal power plant that powers a Tesla)? If the rules are too strict and unreasonable, the common reaction is simply to ignore them. Take for example speed limits, or the work-hours restrictions that we put on medical residents. What about that law that says you can't spit on the sidewalk? These rules are pretty universally ignored, and for good reason.

Easy. If people find that you do wrong, you should be punished. If people suspect that you do wrong, they should investigate you before you are punished. The problem in the Taiwanese example is not that the law was enforced, but that it was normally not enforced. The other solution is that specialist or technical knowledge is not an excuse to break a law.

So, under your standard, Bill Clinton should have been removed from office, all illegal immigrants deported, and the ATF and IRS workers should be in prison for Fast & Furious and the various targeting of conservatives?

I look forward to Tyler's next post, in which he argues that because the marginal value of a dollar is greater to the poor than the rich, the poor should not be punished for theft, which is clearly welfare improving and the opposite of tragedy..

I'd hazard that nitrogen oxide emissions are 90 percent lower because other auto manufacturers obeyed the law. Were they as scurrilous as Volkswagen, I'm sure we'd see op-eds about the worthlessness of regulation.

Are they really 90 percent lower, or are there laws mandating things that we think should make them 90 percent lower?

Yeah, maybe it is sunspots and not gubmint regulations that reduce pollution.

What I'm asking is whether "90 percent" comes from measuring the actual levels of NOx, or whether we're mandating features that don't work / are cheated and kinda think it should amount to 90 percent. There's been a lot of that going around.

"There’s been a lot of that going around."

For example, in the US, CAFE mandates fleet average EPA mileage, and EPA mileage is just about unachievable in modern cars driven normally (i.e., without hypermiling techniques). So you can talk about how the mandate says mileage should have improved by X%, but in reality achieved mileage has improved much less if at all.

Monitor-based, but monitor density is higher in some regions than others. Models are pretty good though.

When you reach technically impossible requirements, I would guess the regulated people begin to throw their hands in the air and stop viewing cheats as so "immoral."

Meanwhile, the politicians like to keep tightening the rules or announcing new CAFE standards because it looks like they are doing something.

I'd almost swear there are also some d!ck measuring between the EU and California, for example in some regulations related to engineered wood. "Oh, you only allow 30 parts per million? Well, we will only allow 15!"

It is not obvious to me that Volkswagen has broken the law. They were told there was going to be a test. They were told to build their cars to pass the test. They did. How is that not obeying the law?

It is not a real world test. It is not meant to be. Every single manufacturer does the same, I will bet.

If that's the case, we'll know it in days. A couple of weeks at the outside. This isn't apparently that hard to test.

It's hard to tell if you're being facetious. VW wasn't told to build a car to pass the test, they were told to build a car that complied with regulatory emissions requirements. They did the former, but not the latter; the test was just a validation mechanism.

@So Much For Subtlety
Everything you said is true. Unfortunately there seems to be passage in the EPA regulation law that explicitly says that is forbidden to use a so-called 'defeat device'. That's the reason why Volkswagen has broken the law.

I also agree with you that a lot of other manufacturers might do similar things but I also think that they do it in a more intelligent way than Volkswagen.

https://en.wikipedia.org/wiki/Defeat_device

The law doesn't require passing a test the law requires an engine to conform to an emissions standard. The actual level of emissions required is set by the EPA through a multi-year study and notice and comment procedure.

The tests are devised by the states or the EPA to assess what the emissions are.

The law prohibits the objective fact of actual emissions. Punishment for violating the law varies based on level of intent.

The law also requires that the engine maker provide a full warranty for fixing the problem and bringing the engines into compliance. So VW is required by law to recall and fix the non-conforming engines.

So they wouldn't necessarily be subject to fines for violating the law but they are always on the hook for a recall to fix any problems later discovered even if the violations are an accident.

I think the point has been made a large proportion of Nox emissions come from older models, not from fraudulent VW cars. As it stands no one can estimate the additional number of deaths ( it's in the noise,less than selfies) The fraud is a fraud but has little impact on air pollution. The shakedown that will come from the US government has more impact on the general public ( loss of stock value for example)

NOx from diesels is much greater than from gasoline engines to the point where "older models" with gas engines produce less NOx than VW diesels. NOx in produced at the peak combustion temperature with extra O2 available and the higher compression ratios of diesels result in higher temperatures and higher NOx.

from this link (which Tyler had quoted in an earlier post)
http://www.latimes.com/nation/la-na-emissions-standards-20150924-story.html
"Today's car is 98% cleaner than a similar mid-1970s model, and new diesel engines are 95% cleaner than those manufactured during the 1980s," the state report found.
Cleaner, newer cars aren't the ones most in need of inspections, Bishop noted.Consider this: In 1990, about 1% of all cars in Los Angeles accounted for between 4% to 5% of the pollutants in the air. By 2013, that 1% was responsible for one-third of the pollutants.
I am guessing diesel car pollution follows a pareto distribution where 10% of the cars contribute 90% to the pollution

Doesn't matter how many extra people were killed. VW knew the rules and chose to break them. Capitalism can only work with clear rules and cheats who break them should be punished.

I haven't seen enough to make up my mind on this, but right now I think this was considerably more severe than the recent GM ignition scandal. It's closer to WorldCom in nature. There was widespread deception at VW, apparently.

I don't think it's irrelevant how many people were killed. I'd like a good evaluation of that number. Is this regulation a silly hurdle, or is it something really important? Does the Director of Engineering have a lot of blood on his hands, or was he just bypassing a formality and making some marketing hay? This will weigh into the punishment, of course, but I'd like to know just to better understand what's going on.

I'm not clear on the science, but it's entirely possible that the impact of the marginal NOx particle is dependent on the overall level of NOx. In that case, it wouldn't make sense to look at the marginal effect of VW's deception, since the impact of their skirting of regulations (in terms of loss of life) was subsidized by other company's compliance. Basically, it could be that things would've been way if everyone else cheated, too.

Capitalism works best when the rules are enforced efficiently: That is, penalties are related in some way to the harm done and punitive damages are proportional to the ratio of those caught to those that are actually breaking the rules.

So, yeah we need to enforce the rules. But we also need to estimate the harm and how likely that there are others cheating in order to understand just how much to punish VW.

No, you've lost me. I like equilibrium common-sense morality like "rules should be enforced", and I don't like "rules shold be enforced sometimes". I get totally lost when I try to work out "widespread and concealed crimes should be punished more leniently".

From Tyler's column:
"suggests this additional pollution has been killing 5 to 27 Americans each year," " A typical value of life, estimated by this method, might run in the neighborhood of $7 million. That would mean Volkswagen has been destroying perhaps around $100 million in value a year. "

I tend to doubt such estimates, but since you stated it wouldn't that imply that it's roughly $600 million per year in damages. And aren't penalties traditionally higher than the amount of actual damages when the act was intentional? Usually, I've seen a 4:1 ratio used. That argues that VW should be fined $2.4 billion for the environmental damage alone.

I'm sorry that should have been $600 million for 6 years of damage (since 2009).

Punitive damages run at most 9x of economic loss, per the US Supreme Court, so that would be 600M x 9 = $5.4 billion a year.
You also have to figure in the loss of value to the buyer of the autos, that's where the big money is. Many buyers were greens who paid a premium based on corporate lies. $6K per car times 11 million cars is $66 billion, with punis, that's a half trillion dollars.

I bet the initial class proposal will include everyone who bought a VW in the last ten years. They'll have to fight to exclude the non-diesels. Because, of course, their value just went down too because the brand is generally worth less after the disclosures.

Not like a used VW was worth anything even before this.

They don't typically have great resale, because they've had lots of problems and people have long memories.

"They don’t typically have great resale, because they’ve had lots of problems and people have long memories."

That's not the normal experience as far as the US market. The VW Golf TDI has been ranked one of the best cars for resale value by Kipplenger's for 2015.

"Forty years after its U.S. debut, the Golf still offers European driving dynamics at a value price -- especially when it comes to the fuel-thrifty diesel TDI model, which gets a $3,000 price drop for 2015 and wins our Best New Car Award."

http://www.kiplinger.com/slideshow/cars/T011-S003-new-cars-with-the-highest-resale-value-2015/index.html

http://www.kiplinger.com/slideshow/cars/T011-S003-new-cars-with-the-highest-resale-value-2015/index.html

"$6K per car times 11 million cars is $66 billion, with punis, that’s a half trillion dollars."

Only about 500,000 affected cars are in the US. And in any case, VW only has a market cap of around $50 billion. Regardless of the legitimacy or fairness of any EPA fines, it's pretty clear that VW will have to cover the actual monetary damages to car buyers. So, assuming the $6K figure is in the ball park, you would expect to see around $3 billion in damages from US customers alone.

You could also add back in the reduced fuel costs for drivers as a result of the defeat devices.

11 million (drivers) * 7,500 (average us driving miles) * 6 (years) = 495000000000 miles

/40 mpg * 2.3 dollars per gallon = 27 trillion spent on fuel by those drivers over the 6 year period.

I don't know the MPG increase caused by the defeat device but any non-trivial value would have been welfare enhancing (even if my estimate of fuel expenditure is off by an order of magnitude or two).

Sources:

11 million Drivers - RZ0
Average driving miles - https://www.fhwa.dot.gov/ohim/onh00/bar8.htm
Golf Fuel Efficiency: http://www.fuelly.com/car/volkswagen/golf
Gas price: http://www.eia.gov/petroleum/gasdiesel/

oli, you mean 27 billions, not trillions, of course.

This dramatically underestimates damages because it leaves out non-lethal harm. For every excess death there are going to be many more hospital admissions, asthma attacks, sick days, etc.

This is exactly right. I am a health economist, and I often find that the value of morbidity losses (i.e. anything that harms your health but doesn't kill you) far outweighs the mortality impact. This will be particularly true for something like air pollution, which has immediate quality of life effects for the many people with asthma and other respiratory conditions. I would need to see the data to know for sure, but my hunch is that only looking at mortality dramatically underestimates the damage that has been done.

I used to do some work in this arena, and I think what the EPA considers justifiable morbidity benefit figures generally don't even remotely compare in magnitude for many clean air regs unless the number of affected individuals is quite large.

What are we talking about, old people who expired from COPD at 78 instead of 80? How do we know it wasn't from increased emissions caused by extra travel to economics conferences? More container ships and tractor-trailers chugging back and forth thanks to globalism promoted by the GMU Econ department?

Tyler, you really shouldn't post this stuff unless you're not also going to advocate a radical localism like JH Kunstler. (Not that there's anything wrong with that.)

Is it kids with asthma? Additional cancers randomly distributed through the population?

Presumably with NOx, it's pretty local in its effects. So it's not trucks and container ships and trains, it's city cars and busses.

Note that John's CA EPA reference which I cite to below shows that my guess as to causes was wrong. It is in fact trucks (although that seems to include busses) and ships and trains. Cars are a comparatively small source of NOx.

Maybe in Europe, where diesel cars are much more common, that's no longer true.

But I do think I'm right about NOx's effects being local and not global.

“Since the standards went into effect from 2004 to 2009, he said, emissions of nitrogen oxides have been 90 percent lower”

That statement might be true... However, actual urban NOx levels haven't fallen nearly as much. Of course, cars aren't the only source of urban NOx and there are plenty of older cars on the road. Some actual data follows.

"Long-term NOx trends over large cities in the United States during the great recession: Comparison of satellite retrievals, ground observations, and emission inventories" (http://www.sciencedirect.com/science/article/pii/S1352231015000564)

"National emission inventories (NEIs) take years to assemble, but they can become outdated quickly, especially for time-sensitive applications such as air quality forecasting. This study compares multi-year NOx trends derived from satellite and ground observations and uses these data to evaluate the updates of NOx emission data by the US National Air Quality Forecast Capability (NAQFC) for next-day ozone prediction during the 2008 Global Economic Recession. Over the eight large US cities examined here, both the Ozone Monitoring Instrument (OMI) and the Air Quality System (AQS) detect substantial downward trends from 2005 to 2012, with a seven-year total of −35% according to OMI and −38% according to AQS. The NOx emission projection adopted by NAQFC tends to be in the right direction, but at a slower reduction rate (−25% from 2005 to 2012), due likely to the unaccounted effects of the 2008 economic recession. Both OMI and AQS datasets display distinct emission reduction rates before, during, and after the 2008 global recession in some cities, but the detailed changing rates are not consistent across the OMI and AQS data. Our findings demonstrate the feasibility of using space and ground observations to evaluate major updates of emission inventories objectively. The combination of satellite, ground observations, and in-situ measurements (such as emission monitoring in power plants) is likely to provide more reliable estimates of NOx emission and its trend, which is an issue of increasing importance as many urban areas in the US are transitioning to NOx-sensitive chemical regimes by continuous emission reductions."

There is no higher incidence of asthma or lung cancer in the US in urban areas vs rural areas, but the Nox levels are higher in urban areas

Stephan,

"My Mind Is Made Up—Don’t Confuse Me with Facts" - Many sources as far back as 1945.

Well, NOx leads to ozone, which ... isn't a big factor in lung cancer, no, as far as I can tell.

Ozone is said to be bad for you if you have asthma, not to cause it in the first place; it irritates the lungs and aggravates the asthma, rather than causing it, as far as I can tell from a quick scan of the literature.

NOx itself is not a singificant health issue - and one source I found from the WHO suggested that very high urban NOx levels reduced O3 levels via chemical scavenging - adjacent suburban and rural areas with less NOx had more O3, for that reason.

Complicated, eh?

Old-fashioned Los Angeles-style smog was extremely unpleasant, but I've seen surprisingly little evidence after all these years that it was lethal for many people. After all, huge numbers of people, many of them fitness and health fans, flocked to Los Angeles during the Smog Years (roughly the half century from 1943 onward).

So maybe deaths are the wrong metric for measuring smog, rather than just discomfort.

I'm sure happy that smog is virtually gone. It would be interesting to know how much smog cost to overcome.

I say the worst part is the CEO of Volkswagen still gets a $32M pension while this happened on his watch. So What Volkswagen is a laughing stock for the 3 - 5years.

Except it seems to have started right when he took office - in such a way that makes it clear it started before him.

The Board statement VW AG released suggested that the Board thought he was not culpably in the know.

(If CEOs are going to lose their pensions and contract agreements if there's a scandal, they'll demand more pay in advance to make up for it. Because otherwise why take that lame job?)

WV had a strategy to achieve a material competitive advantage by lying to their regulators. The "defeat device" software development was a calculated and knowing effort to evade the testing requirements. This is not "gaming." This is fraud. Gaming is tuning the engine to preform best on 6% grades if the test is a 6% grade. Fraud is an engine that only runs clean when hooked up to the testing equipment.

It also had the effect of defrauding their customers, who were told they were buying one product, when in fact they were getting another. The only appropriate remedy I see is to buy back the vehicles and VW can resell them for whatever it can get for a retrofitted compliant vehicle.

I would be happy to see this type of knowing and material fraud result in the equity going to zero.

I am all for smarter regulation, but that is a separate question.

"I would be happy to see this type of knowing and material fraud result in the equity going to zero. "

I suspect that international politics is going to prevent this. The German's won't stand for an American court bankrupting a German company for failure to comply with American regulations. However, if Germany decides the violations are significant to German customers or the German people, then VW might well be toast.

The magnitude of this caper, and the damages it has produced, require one remedy and one remedy only, war. The US has been defrauded, its citizens sent to an early grave, nothing that Volkswagen AG or the German state that it controls can make up for this crime in financial terms. Industry in Germany and its satellites around the world must be physically destroyed and the oppressive German manufacturing complex brought to its knees.

Hold on there Tyler, what if we think about Volkwagen as an employee!!! They've busted their metrics!!! fire em!

http://www.technologyreview.com/news/541531/the-measured-working-man/#

The hypocrisy is breathtaking.

The anti-VW rage doesn't depend on the air being dirtier. People are angry because VW deliberately flouted clearly written laws. VW's refusal to obey the law must have been approved and executed, directly or tacitly, by tens to hundreds of relatively high-ranking employees.

VW's chicanery degrades societal respect for the rule of law, a lofty concept that we struggle to reach even in the best of times. That's why folks are angry. Most people enjoy living in a relatively high-trust society and do not suffer very gladly the efforts of those who would transform it into a low-trust society.

Curt F. makes a succinct and effective point. Personally, I don't particularly care about the regulation they violated as much as I do about the substantial and material fraud they committed.

Chimpanzees punish cheaters, and so should we, for the same reasons.

+1

This appears to be more like WorldCOM than prior automotive scandals. It's a large scale fraud.

I do think it's yet to be determined how large a collaboration was required within VW to pull this off. I'd dial back my comment if I thought a couple of guys could have done this without telling anyone.

Welcome to the dystopia. Your low trust people will require ever increasing amounts of laws, while your anal "the rules must be followed" types will enforce them to the letter.

I think another interesting comparison is with GM ignition switches, mentioned above. A similar number of deaths, one set concrete with real people, one abstract with statistical impact.

They should have the same penalties.

But broader than that, yes, if we want to really tackle pollution death we should be ready for lifestyle change. No more muscle cars.

I wonder how many will downgrade their value for a pollution death when reminded that they should get a hybrid (or depending on local grid sources, an electric).

This seems much worse than the GM scandal. It seems like deliberate fraud, rather than one guy who messed up in a poorly run firm. Also, most people put the death count at several multiples of the GM count, right?

I saw something claiming that they were similar numbers, but even being within the same order of magnitude would make for an interesting comparison on value of identified vs unidentified victims.

On the cheating issue, GM was maybe less a cheat and more a cover-up? Will that be seen as less premeditated?

"On the cheating issue, GM was maybe less a cheat and more a cover-up? Will that be seen as less premeditated?"

That's my impression, but I don't think the facts have really come out about VW.

Also, I think the general perception is that VW is a better run, more tightly controlled place, so it's harder to imagine something like this being done by an isolated cabal without cooperation from management.

GM didn't design the feature into their vehicles and tried to fix it. Their was no intent to cause harm, at least not from the get go.

I think to find a similar American case you need to go back to the Ford Pinto "Cost/Benefit" matter in '68.

If GM covered up while knowing of actual deaths, that would be yet another variation on fairness. Behavioralists would expect them to be judged more harshly than VW who only risked hypothetical lives.

But as I say, if the numbers are correct and similar, I think they should be judged similarly.

I don't think it's the same order of magnitude, at least based on the limited facts available.

Fining GM just means a bigger bailout.

Domain Error. Easily worst TC piece I have read. What is the argument? Because there are bigger problems this is not really a problem? Remember how civilization and societies have kind of flourished in cultures with strong morals, values, courts, sanctions against fraud and graft, etc? Try again, you know better.

What baffles me the most is that not a singe media outlet so far was able to explain what NOx actually does. This might not be because of media incompetence alone but also because the data regarding NOx is really muddy.

NOx is a precursor of ozone. A few years ago quite a few people were really worried that there might not be enough ozone - especially in the stratosphere. No one is talking about this anymore. Today it's all about tropospheric ozone, especially at ground level.

So what is ground-level ozone doing? Not even the EPA can say for sure what it does. It's a lot of *can* and *may*: Ozone *can* irritate your respiratory system, causing you to start coughing, feel an irritation in your throat and/or experience an uncomfortable sensation in your chest. Ozone *can* aggravate asthma. Ozone *may* also aggravate chronic lung diseases such as emphysema and bronchitis and reduce the immune system's ability to fight off bacterial infections in the respiratory system.

NOx seems to be the Chicago Bears of pollutants. It's a pollutant but seems to be pretty far away from the really big players. A serious calculation of how many people were harmed by a few extra gallons of NOx diluted in quite a lot of air might be closer to reading tea leaves than to actual science.

Acid rain is fairly well understood.

Is this NOx pollution case about acid rain? I don't think so. Acid rain is not relevant anymore since flue-gas desulfurization was implemented in the 1980s. I highly doubt that the effect of the NOx pollution by Volkswagen on acid rain can be measured.

Again: Look in the media outlets for detailed information what NOx actually does. I read many articles about this topic and found no detailed information. So my theory is that this NOx pollution case is not really about NOx pollution.

You asked what the big deal about NOx is, and that's what spurred regulation.

I know what the big deal about NOx is. It's the irritation to your respiratory system. As I said the acid rain regulation is quite old. The NOx diesel regulation is quite new.

I thought acid rain mostly had to do with sulpher.

The argument that no harm was done here is foolish in terms of preventing other types of cheating that can cause real harm. That's the point.

So it does not matter anymore how much harm was done? This seems to be true in the sense that not too many people seem to actually care how much harm was actually done. Your comment and so many others give me the impression this NOx pollution case is not really about NOx or pollution. It's about other things.

I think you are close to actually getting the larger point!

Drunk driving laws are pretty severe even when no harm is done, because of the potential for harm. In this case it's a transgression against society. Failure to defend the principle will result in more cheating and more fraud. Whether or not damage has been done here is really unknowable. I kind of doubt it but that's not the point. Neither is the point whether the regulation made sense to some or the other of us.

Should the punishment be greater if there were substantial, provable damages, Sure. But the punishment should be substantial even without that.

Drunk driving is very much about the harm that is done. A drunk driver that kills four others is punished *quite a bit* differently than a drunk driver that harmed nobody. Don't you think?

The same mechanism must apply for pollution cases of course. I'm not saying Volkswagen should not be punishd. I'm saying to get the right amount of punishment you need to consider how much harm was actually done.

This is a poor comparison: There is no benefit to drunk driving but there is a penalty in cost and performance for every car that needs to meet a regulation. If that regulation turns out to be irrational (costs much more than the benefit it provides) this has a great effect on how mad I am at VW for cheating.

Unknowable, in the sense that one can statistically describe the odds of dying from smoking, but can never attribute a specific case of cancer 100% for sure to smoking, even for someone who smokes four packs a day. It's statistics, so in a sense it IS knowable.

Is gaming *regulations* really "a transgression against society"...especially if no harm can be shown?

What if CARB decertifies the affected TDI models and prevents them from being re-licensed in California until those cars are modified (per a forthcoming VW recall that will have to be certified) and then retested to ensure compliance? Ultimately, CARB certifies cars and trucks so that emissions are controlled within the law. It sounds like existing TDI cars are not operating within the law, so it seems justified to not allow them access to public roads until they comply. Sucks to own a TDI. Great to be a class action lawyer. Sucks to be VW.

What if CARB declines to test *any* new VW models until VW can demonstrate that their corporate policies have been rectified to prevent writing new software that actively falsifies the car's emission data ? Sucks to be VW.

VW was providing a service to their customers. These diesel emission controls suck. They're unreliable and they kill your mileage. Motorists are much happier with these controls "defeated" than "enabled".

These devices costs thousands per car (on top of the premium that you already pay to own a diesel). Multiply by the number of these vehicles that are sold every year, and the cost far exceeds any "benefit" in lost lives, worse health, etc.

We are talking about the difference between a 2004 diesel and a 2009 diesel. It's not like the 2004 diesel was an emissions monster. NOx was higher, but other pollutants (HC, PM) was controlled (these are easier to remove than NOx).

"Motorists are much happier with these controls “defeated” than “enabled”."

While I think that's true of, say, pickup drivers, I think a lot of people bought VWs because they were nice to the environment and they expected to get both low emissions and high mileage.

I examined the data in 2005, and was forced to reverse my longstanding affection for VW diesels, and buy a hybrid. Data was available then, for any who actually bothered to look it up.

That is another subtext, that cities were moving as fast as they could from diesel to CNG in this timeframe. Not exactly a secret.

To be clear, clean diesel like clean coal is an engineering drive to clean up an inherently dirty fuel. Why bother when cleaner fuels are readily available?

Run CNG and you're the boss.

@The Engineer
I read similar things. You can reduce NOx in diesel cars but then other more dangerous pollutants might increase. People want to drive big SUVs that run on gasoline and diesel while at the same time the car exhaust must be ready for deep inhalation. Next thing you know people will sue when crashing your sports car with 100 mph into several trees results in serious harm for the occupants.

See, for example, http://jalopnik.com/paul-walkers-daughter-files-wrongful-death-lawsuit-agai-1733537264

Yeah I know. I was thinking about this case when I wrote the insinuation. I think that's what this is all about: Making a lot of cash with civil lawsuits and other stuff. It's not about the harm that was actually done.

Obviously it's about that for some people. It's presumably not about that for people who own VWs, people who (maybe incorrectly) believe NOx emissions to be a big deal, and to the extent they actually are a big deal people who are sick or dead because of this, and people who generally think law and order is a reasonably attractive thing.

I really would like a better accounting of the need for this regulation in the first place, don't get me wrong. This is a good time to revisit that, and I think you see a lot of attention in that direction.

http://www.arb.ca.gov/research/diesel/diesel-health.htm

Thanks.

Not surprisingly I suppose, cars are a tiny part of the smog problem. It's mostly trucks at 71% (funnily enough, they don't break out buses), and secondarily near-shore boats and trains. Cars presumably fit into "Others, <1%". The break out is given for Oakland, and I assume it's similar for other areas. But boats must be a lesser contributor the farther you go inland.

That said, I'm not sure the CA EPA represents an unbiased source in this matter.

"VW was providing a service to their customers."

It's likely that the resell value of their cars has substantially declined. I doubt that's acceptable to many of them. They're going to want redress for the economic damage inflicted on them by VW's fraud.

Unless a govt. regulator does not allow the cars to continue to be used, which I think is unlikely, the value of the TDi cars should rise. After all, now you can't get them and new fixed ones are likely to be more expensive and/or have lower mileage.

The benefit for small diesels was tenuous after hybrids came on line. Diesel owners like to quote highway mpg, but hybrids do as well in the city as well.

150k miles on my Prius and 48-50 mpg on every tank, mixed driving.

But hybrids are more expensive
http://www.edmunds.com/hybrid/before-buy.html

“If you make 10,000 regulations you destroy all respect for the law.” Winston Churchill.

The obvious subject here is whether VW cheated the rules and whether they will be punished for it. I'm not holding my breath : VW will pay dearly for this.
The less-than-obvious (and imho far more interesting) subject is the one Mr. Cowen is hinting at : Do the rules make sense? Do they impose an undue burden on society for a negligible benefit (or even a loss)? My bet here is that nobody will ask. If someone asks, nobody will investigate. If someone investigates, nobody will sue. If someone sues, nobody will be punished.

There are many procedures (efficient or not) allowing to fight corporate malfeasance. I don't know of any one to combat regulation failure.

Good post. No one will investigate the EPA on the value of this regulation. In my mind the EPA should have been more straightforward and say " we're banning diesel " because no diesel can meet our NOx+ CAFE regulations unless they're cheating

Excellent point. The real question here is do the rules make sense?

The biggest caveat that nobody has brought up in this thread is that the emissions controls on the VWs can reduce NOx emissions at the expense of worse gas mileage, a.k.a. more CO2 emissions. Tyler's math only shows the NOx side of the story. What I would really like is a calculation showing that tradeoff. It seems to me that it is entirely possible that VWs changes yield a net global benefit for overall emissions harm, by trading more NOx for less CO2.

"the World Health Organization estimates that about seven million people die each year worldwide from air pollution. Even within the United States, early deaths from air pollution have been estimated to run about 200,000 a year"

Lies, damn lies and estimates.

Not to mention passive voice.

Germany is fringe-left nation -- they put the Socialism in National Socialism after all -- so I would not expect the NYT to make much fuss about rampant criminal fraud by one of its biggest companies.

Clearly the enemy is us.

(Dear God, man.)

'Germany is fringe-left nation'

The Bavarian Christian Social Union begs to differ - after all, they put the Christian in Christian Socialism.

For that matter, the Christian Democratic Union would also disagree, being the ones that put Christian into being democratic.

But then, there are some people, such as the National Socialists and their various offshoots, that have always considered Christians to be the worst sort of 'fringe left' people, being opposed to such things as eugenics, total war, and genocide.

Which, oddly enough, are things that modern fringe-left Germany also staunchly opposes. Though undoubtedly it is just a coincidence that two of the parties currently in power in Germany have 'Christian' in their name.

Well p_a, that billion dollars that Walmart lost in Germany is probably going to look like chump change compared to the fines and law suits brought against Volkswagen. Is it time to re-evaluate your priors?

Germany needs to oppose lying and corporate fraud more though.

The response to National Socialism meant big buildings being blown up over the heads of apolitical old ladies and children as well as the immolation of Kraut panzer commanders. It's a collective deal and guilty or not the Germans must be punished collectively, it's time to launch some missiles at the Fatherland. Gotta be careful not to hit Ramstein Airbase, though.

I imagine you think that smoking isn't bad for health, since it's just damn lies and statistics.

"emissions of nitrogen oxides have been 90 percent lower. “It’s not like this is going to offset the majority of the benefits of these standards,” he said. “But there will be some impact, and we need to get a better handle on it.”

90% decrease with these VW diesels operating means it was achieved without VW meeting the standards. So, the cheating had no impact on the 90% decrease.

If VW had not cheated, then the decrease would have been greater than 90%.

I hope that 90% reduction figure isn't according to lab tests.

The impact on the US will be relatively minor since we never got so heavy into diesel. But for Europe, the defeating of lab tests, apparently industry-wide, has been a lot more important to nitrous oxide levels. These revelations are going to be playing out for a long time and could signal the end of Europe's unusual love of diesel.

http://www.ft.com/intl/cms/s/0/7a86035e-65f6-11e5-97d0-1456a776a4f5.html#axzz3nABUu2qx

'and could signal the end of Europe’s unusual love of diesel'

Well, anyone with a bit of famillarity with how refining works just might understand Europe's love of a fuel that provides ca. 10% more energy per volume just might lead to saving throughout the entire supply chain.

With the added bonus that the 'excess' gasoline is exported to the U.S. and other markets -

'European refiners are making the highest profit from gasoline in more than 10 months amid speculation that demand is rising to ship the motor fuel to West Africa, the U.S. and Latin America

Gasoline’s crack, or premium to Brent crude, rose to $13.46 a barrel on Tuesday, the highest since April 29, according to PVM Oil Associates Ltd, one of the largest brokers for the fuel, before falling to $13.13 at 1:21pm London time. The flow of ships carrying oil products to New York from Rotterdam climbed to the highest in nine months, a Bloomberg survey of shipbrokers showed.

“Exports have been supporting Europe with good demand to West Africa, particularly Nigeria, as well as to the U.S. and Latin America,” Olivier Jakob, managing director of Zug, Switzerland-based Petromatrix, said by phone. “The refinery maintenance period is coming up which is likely to provide further support.”

Europe produces more gasoline than it consumes and relies on export demand to offload the surplus. Traders booked tankers with the capacity to haul about 7.3 million metric tons of refined fuels to West Africa from Europe so far this year, according to lists of charters compiled by Bloomberg. That compares with 4.6 million tons in the first quarter of 2014.

A total of 22 tanker charters have been completed or anticipated for the Rotterdam-to-New York voyage in the next two weeks, the highest since June 4, the Bloomberg survey showed. Gasoline cargoes have left Europe bound for Mexico and Togo in recent weeks, according to researcher PJK International BV.

In the U.S., gasoline demand averaged 8.7 million barrels a day in the four weeks to March 6, Energy Information Administration data showed Wednesday. That’s the highest by that measure for the time of year since 2011.' http://www.bloomberg.com/news/articles/2015-03-11/europe-gasoline-crack-climbs-to-10-month-high-on-export-demand

Basically, European refiners have a love of diesel based on theit ability to make a profit selling gasoline to markets less able to take advantage of higher energy content fuel. And just wait until you hear about the German home heating oil market - with the added benefit that fuel oil and diesel are essentially the same thing, except for how they are taxed.

PA,

Alas, you need to work a bit harder to understand refinery economics. Europe is a substantial net importer of diesel and exporter of gasoline. That means that the European refining system has to incur considerable incremental transportation costs (importing diesel and exporting gasoline) versus a more balanced system that consumed both the gasoline and diesel produced from a barrel of crude oil.

Diesel does provide more Joules per gallon than gasoline, but fewer Joules per kilogram. For better or worse, that makes gasoline more efficient than diesel (in this respect).

For a saner view of European refining economics, see "FuelsEurope" (https://www.fuelseurope.eu/knowledge/how-refining-works/diesel-gasoline-imbalance). Quotes

"Although the EU has a significant excess of gasoline production capacity, it is still unable to meet the regional demand for diesel, heating gasoil and jet fuel. As a result, the EU relies heavily on foreign imports. Currently, the majority of diesel and heating gasoil comes from Russia, while jet fuel is largely shipped from the Middle East. Most of the EU’s excess gasoline is absorbed by the US."

"Meanwhile, the demand for gasoline in Europe continues to shrink, while the demand for transport distillate – jet fuel, road and marine diesel – is growing. Without balancing the demand barrel by exporting the surplus of such lighter components as gasoline, many EU refiners will struggle to maintain their operations. On top of this is the increasing level of bio-components in gasoline, which only accentuates the reduction in fossil gasoline demand."

Remember, importing diesel and exporting gasoline is a cost, not a gain.

All,

A minor excursion into refinery chemistry and engine design may help here. Diesel is mostly a "straight run" product obtained by distilling crude oil. In other words, the diesel yield is somewhat fixed by the amount contained in the original crude oil. That's not quite true because resid and heavy gas oil can be cracked to produce more diesel from a barrel of crude. However, the broad point remains. Refineries have considerably more flexibility to produce gasoline from crude, versus diesel. Note that flexibility in this context, is mostly design flexibility, rather than operational flexibility. Predictably, the U.S. has the most advanced refineries in the world measured in terms of conversion of crude to light products (gasoline). Why? Because of heavy demand for light products and very low valuations for heavy products (because of competition from coal and natural gas).

Gasoline and diesel are very (very) different from an engine design perspective. Gasoline is mixed with air and then compressed before ignition. Ignition (from the spark) occurs before, or at, TDC (Top Dead Center in the 360 cycle). Gasoline is designed to avoid (octane rating) combustion before the spark. Under undesirable conditions, gasoline pre-ignites (explodes) producing the sound called "pinging". Pinging is both a physical danger to the engine and reduces the practical power produced by the engine.

Diesel is (almost) exactly the opposite. Diesel is injected into the cylinder at or near TDC. This means that diesel must be injected against considerable back pressure, at the peak of the compression cycle. Diesel is designed (cetane rating) to burn as quickly as possible as it is injected.

These design differences have consequences. Gasoline engines must operate using stoichiometric fuel-air mixtures (matching exactly the right amount of oxygen with exactly the right amount of gasoline). This requirement is not a consequence of the inherent properties of a gasoline engine. It is strictly an emissions requirement. In other words, stoichiometric fuel-air mixtures produce the fewest emissions (with a catalytic converter).

By contrast, diesel engines can, and do, operate far below a stoichiometric fuel-air mixture. In other words, they can, and do, run with considerable excess oxygen (air). This enables a diesel engine to yield considerably better fuel economy in some cases. Notably, diesels are markedly better in urban, stop and go, driving.

However, running with excess air also yields much more NOx. Gasoline engines can destroy NOx using their catalytic converters (by combining NOx with unburned hydrocarbons and CO). Diesels can't. Of course, Diesels also produce much more particulate matter than gasoline engines (because they burn a much heavier fuel). There are extensive claims that diesel particulate matter is carcinogenic. This is also disputed.

All,

A few more notes. Because diesel engines require fuel injection at or near TDC (against massive back pressure), the fuel pumps are expensive and sophisticated. (think Bosch). Gasoline fuel pumps are trivial toys by comparison. In WWII, German military aircraft had beautiful, highly advanced DI (Direct Injection) engines. This design was mandatory because Germany could not produce aviation gasoline in sufficient quantities.

By contrast, the US used large, unsophisticated gasoline engines running on 100+ octane fuel. In technological terms, German engine design was far superior to the U.S. In air combat, the U.S. enjoyed a large and decisive advantage.

By the way, it is not true (as many / most Americans believe) that German technology was generally superior to the U.S. in WWII. In some areas, Germany was well ahead (V1, V2, some aspects of aircraft design). However, the U.S. was well ahead in other (and not just nuclear technology).

Just a test

Reason must prevail at some point and this VW case shows how stupid we humans can be.
TC's piece shows how stupid we can be.
But, wait, there is more.
Forcing the existing VW's to meet NOX emission standards will essentially kill the excellent mileage performance of diesel engine. What it means is simply that more fuel is burned on a per mile basis. You fix the NOX problem but now your carbon footprint is going thru the roof. When it comes then to fix the TDI NOX problems, we need to balance the bad we do with NOX emissions vs the bad we do with increased CO2 emissions and resulting climate change effects. That is the economy that lawyers and environmentalists need to be involved with. For now, they only seem to be focused in their narrow agendas. Lawyers trying to make easy money. Environmentalists, trying to win one battle against corporations. At the end of the day, it is the citizen who suffers.

Very good comment. This might be even true. A few thousand people die world-wide because more fuel is burnt so that a couple of 92-year-old Americans with COPD can live 2 months longer. I guess this is called progress.

I may have missed something, but how do we know "emissions of nitrogen oxides have been 90 percent lower"? To measure emissions one has to measure it from the source, whether it be a smokestack or tailpipe, and for sources not measurable, modeled based upon certain assumptions. Since VW falsified emission measurements, we don't know what VW vehicles emitted. There is a lot of certainty packed into this claim. More persuasive would be something to the effect of "even if VW emitted 10 to 40 times allowed emissions, its potential contribution to NOx emissions would still be de minimis." Don't know if that is true, but given the numerous sources of NOx it doesn't strike me as crazy.

We should allow Tyler Cowen to murder one or two people per year. On a planet of 7 billion people, letting Tyler kill two people is not going to have a big impact, and as an economist, we can be sure that the murders he commits will reduce taxes or labor costs or something else that increases profits. so the economic favor giving Tyler the liberty to kill one or two people per year.

And let's ignore the slippery slope of extending this liberty to every economist, and well, every business owner who executes economics, and CEOs representing millions of shareholder should have the liberty to kill thousands or millions on behalf of all the shareholders...

You brought a pure altruism model to a warm glow fight

Looking at the Brown NOx in LA, I doubt that it is 90% down.

However, independent of that, faking the data should be a lethal fraud for a corporation. In my business, I had a zero tolerance for "dry lab -- aka false data". Having deliberately bad data is a far worse crime than just not getting the data, as it impacts all decision making with no indication of falsehood.

This should be a case of corporate death penalty forcing the pieces to be sold off and the entire management fired.

In a discussion of the policy implications of a firm trying to circumvent the regulations which have reduced nitrogen oxides by 90%, what importance DOES the 90% play? Would it be less bad if the cheated-upon regulations had reduced nitrogen oxides by 99% or less bad if they had reduced them by only 50%?

I'm with Tyler.

Let's let the murderers out of prison. By comparison, they hardly did any harm at all.

Probably true, especially when prosecutors use the "felony murder rule" which is to charge every gang member in a robbery gone bad with murder, if there's a murder committed by another gang member, so the entire gang gets charged with murder though they initially did not want to do murder.

Has anybody mentioned how adjusting for GDP per capita, one life in the USA is worth more than 10 lives in the Third World? So you must adjust, like insurers do, any potential 'worldwide damages' to humans using this calculation. And this being an economics site (or so they say), you cannot use the 'morality' argument that a life is the same worldwide, regardless of nationality.

I've been deeply annoyed by both this and the prior VW post. Seriously undermine TC's credibility.

The question seemingly posed to the discussants was about corporate fraud more generally--"Is Honesty for Suckers? Has the pervasiveness of cheating made moral behavior passé?"--and the response mostly evades that. if anything, estimating the dollar value of lives lost (yes, we would all have preferred QALYs lost) serves only to minimize the harm and say that this particular instance of corporate fraud is no more hurtful than someone marketing a film...at least I think that's the implication? The more I read it the more incoherent the argument is.

If Volkswagen knowingly went out to the streets, kidnapped a dozen random asthmatics, and used their body parts to pass US regulations and sell cars--which isn't terribly different in effect from what happened--well we'd all be pretty upset. And justifiably so.

Ouch the collateral damages. Three big German IPO at this time: Bayers Covestro Plastics where auto industries are big customers (suppose to be the largest German IPO since 2000), Schaeffler AG auto component maker, and Hapag Lloyd shipping group.

One of the issues that keep seeming to reappear, is the radical disparity of accountability based on whether the criminal was a corporation or criminal. I sincerely do hope this comment gets moved up for a deeper discussion, and more intelligent minds can provide clarity, but lets take an average estimate, and say the actions of WV killed 100 people. (10 a year for 10 years). Our response and sense of justice seems remarkably muted in relation to, say, a hypothetical discovery of the greatest ever serial killer in our midst. What is this saying about our sense of justice?

This type of non-calculable cost benefit analysis and the "open borders" stuff are symptoms of freshman year pizza box libertarianism. Up next, private ownership of roads.

There is a regulatory process - if you don't like that then fight that.
If regulations are in place, even if you think they are wrong, or "inefficient", you are obliged to obey them.

If you don't, and you are caught, you should be punished. Should the punishment be related to damages caused - sure. But even if there are zero **demonstrable** damages there should be significant punishment - like drunk driving or cheating on the SAT's. What's the correct amount? = enough to really hurt VW, get the executives responsible fired, and disincentivize this behavior. Rough order of magnitude = billions. Is prison OK = yep.

It's not complicated. The conflation of points in the comments is pretty silly. The original post remains embarrassingly short term freshman year Benthamite or some other execrable derivative of that fungus.

When presented with large adult real-world issues, dogmatic libertarianism inevitably chokes, gags, spins and leaves the pizza parlor.

"There is a regulatory process – if you don’t like that then fight that.
If regulations are in place, even if you think they are wrong, or “inefficient”, you are obliged to obey them. "

That's why I refused to help throw that tea into Boston harbor and stayed at home playing solitaire while Washington crossed the Delaware.

I can't help feeling that there is *way* more to this story than meets the eye. It is rarely mentioned that Bosch in fact supplied the complete fuel delivery and metering systems for treating the exhaust gases as well as all the software and 'defeat' code. They claim they told VW the defeat code was to be used only for testing. Maybe this was all just a complete balls up. If deliberate, VW must have known this would eventually be discovered ( why did it take so long? Doesn't anyone test these things by sticking a monitor up the exhaust pipe and go for a drive? ) and cause tremendous damage to their reputation.

Why the big deal about VW, but no outrage about J&J intentionally doctoring studies so that they wouldn't have to claim serious side effects in their off-label marketing (unapproved) of Risparadol to children (boys grew breasts, which they knew, but hid) and the elderly (lots of stroke victims, the reason they weren't approved for marketing it to the elderly)?

J&J intentionally doctored studies, and then hired third parties to market to groups that they were explicitly not allowed to market to.

NW,

I guess people understand cars better than obscure pharmaceuticals. By the way, J&J has paid substantial fines (see "Johnson & Johnson to Pay More Than $2.2 Billion to Resolve Criminal and Civil Investigations") and the lawyers have collected even more. See "J&J Said to Reach $4 Billion Deal to Settle Hip Lawsuits". Note that the Hip lawsuits are separate from the Risperdal cases.

Online sources suggest that J&J will payout roughly $20 billion to settle the cases against it. See http://www.forbes.com/sites/greatspeculations/2015/03/10/here-is-how-much-lawsuits-cost-jj-every-year/ for a source.

No crocodile tears for J&J on my part.

Not sure I'm comfortable with the 'rounding error' point.

I do think it is important that (we) economists oppose the 'any death is one too many' nonsense when considering the costs and benefits of projects.

However, this is not a government policy with benefits and costs. It was fraudulent action for personal gain by a specific set of individuals at VW. It's probably criminal. If someone commits a crime that leads to 5 to 404 deaths in a single year, that's a pretty serious crime no matter how many people are also dying from other things.

Rounding error arguments can me slowly multiplied to extreme outcomes.

Why not fund program A? It's equivalent to a rounding error in the public budget? OK, so lets fund programs BCDEF...Z, etc.

Why not increase the regulated air quality level. It's equivalent to a rounding error. Until it's double.

And then it's not a rounding error any more. It's like arguing against individuals taking action because they are small. Then we end up in collective messes.

That piece did not help Economics resist the incursions of the behaviorialists. The NYT probably published it so that its readership can say, "See, that's how they think, everything is just about money."

After the heavy truck engine manufacturers did this in the 90's, the EPA and DOJ made it clear next time people would go to jail. VW decided to test that hypothesis, apparently.

VW was trying to avoid $2000 dollars of cost or signficantly reduced performance. That's fairly significant for the low-end of the car market, but I can't see how it effects a F-150 Diesel. I'd look to the French diesel manufacturers to fall next. Certainly this will result in regulatory change... even the non-cheaters game the EPA tests. Active reporting of NOx emissions would be easy to implement.

And to several commenters above, University of Denver professor Gary Bishop's roadside emission testing has shown 80+ percent of criteria emissions are from the worst 10% of cars. He even found a car that produced more CO than CO2!

VW should be punished for the fraud. As far as its impact on public health , I don't worry about it. Regarding cars I worry about the 33,000 deaths a year in traffic accidents in the US ( 1 million worldwide) .It's very tragic. I ride my bike (bicycle) almost every day, I worry about cars hitting me as they zoom past often at high speed . 743 cyclist died in traffic accidents in 2013. I can't wait for Google cars, even the ones that look like golf carts and are limited to 25 mph. They would do fine for me.

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