Just how guilty is Volkswagen?

I have a few points:

1. There is decent evidence that many other car companies have done something similar.  Read this too.  Besides, Volkswagen committed a related crime in 1973.  When I was a teenager (maybe still?), it was commonly known that New Jersey service stations would help your car pass the emissions test if you slipped them a small amount of money.  So we shouldn’t be shocked by the new story.  The incentive of the agencies is to get the regulations out the door and to avoid subsequent bad publicity, not to actually solve the problem.  So yes, there is a “regulation ought to be tougher” framing, but there is also a “we’ve been overestimating the benefits of regulation” framing too.  Don’t let your moral outrage, which leads you to the former lesson, distract you from absorbing some of the latter lesson too.

2. We are more outraged by deliberate attempts to break the law, compared to stochastic sloppiness leading to mistakes and accidents.  But it is far from obvious that the egregious violations should be punished more severely in a Beckerian framework.  In fact, if they are harder to pull off, compared to sheer neglect, perhaps they should be punished less severely, at least from a utilitarian point of view.  I am not saying we should discard our intuitions about relative outrage, but we ought to look at them more closely rather than just riding them to a quick conclusion.  I’ve seen it noted rather frequently that the head of the supervisory committee at Volkswagen is named Olaf Lies.

3. Don’t think this is just market failure, it springs from a rather large government subsidy program.  Clive Crook makes a good point:

Remember that “clean diesel” was a government-led initiative, brought to you courtesy of Europe’s taxpayers. And, by the way, the policy had proved a massively expensive failure on its own terms even before the VW scandal broke.

…At best, the clean-diesel strategy lowered carbon emissions much less than hoped, and at ridiculous cost; at worst, as one study concludes, the policy added to global warming.

4. One back of the envelope estimate is that the added pollution killed 5 to 23 Americans each year.  Now I don’t myself think we should always or even mostly use economic methods to value human lives.  But if you wish to play that cost-benefit game, maybe here we have $25 million to $100 million in economic value a year destroyed.  It’s not uncommon to spend $100 million marketing a bad Hollywood movie.  So in economic terms (an important caveat), this is a small event.  Most of the car pollution problem comes from older vehicles with poor maintenance, not fraud on the newer tests.  It also seems (same link) that diesel engines are 95% cleaner since the 1980s.

5. The German automobile sector exported about $225 billion in 2014.  That’s almost as big as Greek gdp.

6. Manipulated data will be one of the big, big stories of the next twenty years, or longer.

7. It is worth citing Glazer’s Law, which is designed to classify explanations for microeconomic puzzles: “It’s either taxes or fraud”

This one isn’t taxes.


You're underestimating the benefits of reactionary moral outrage.

vigilance is underestimated in our time. For example, even the "free rider" problem. I suppose it is literally referring to someone riding for free on public transit? if someone is prosocial in other ways, such as vigilance, pertaining to the ride, they aren't riding for free.

I can't believe people are defending Volkswagen here. This is fraud, and it is indeed outrageous.

I can't believe it, either. It undermines the important social organizing principle that self-regulation can generally work pretty well (e.g. in compliance with filing tax forms), without heinous amounts of oversight.

Plus, let's think about this: Volkswagen is "too big to fail". In theory,

they should fix the cars,

they should pay a penalty for each car for breaking the rules, and

they should compensate each owner for at least the loss of resale value, and maybe be forced to buy back the cars.

That's what could be done if there was just one lemon car. But if we add up all these potential penalties, do we still have a Volkswagen? And if Volkswagen goes under, are we better off? Wouldn't this be like the case of Arthur Andersen? When they were forced out of business due to their actions on Enron, their employees lost and the sector became even less competitive. Did the public at large do anything but lose from forcing Arthur Andersen out of business?

So Volkswagen won't be forced out of business or become severely crippled. Maybe the Germans will throw some executives and a couple of unlucky programmers in jail, following the Nurenberg principle.

Prison for executives is obviously necessary in too-big-to-fail situations involving corporations.

Yes! We should all be good little environmentalists and drive Teslas and burn coal to generate electricity in some poor person's neighborhood.

Because any of that follows from Volkswagen's deception being outrageous.

Honestly, CAFE standards are a ridiculous test that have increased emissions and driven down human welfare over the past thirty years. We need to just get rid of the stupid law.

There are much better ways to reduce fuel consumption then CAFE. Now that does not has much to do with VW committing fraud.

Daniel in VA,

I did quite of bit of work in emissions testing in the 1980s with the car companies (including VW in the US). No one would have even considered cheating back then (at least as far as I could tell). A few observations.

1. Cheating was essentially unthinkable. The idea of programming a car to operate differently when a test was underway wouldn't have occurred to anyone. Of course, the software / hardware wasn't nearly as sophisticated back then.

2. While cheating was unthinkable, "teaching to the test" was definitely thinkable and commonplace. In other words, the car and oil companies worked together to satisfy EPA tests to the letter. The fact that cars would produce far more emissions under realistic driving circumstances (and over the life of the vehicle) was well known but (mostly) ignored (see below).

3. No one questioned the necessity of EPA emissions testing (even if the details were questionable). Support for government regulation of car emissions inside the car companies (and the oil business) was near universal (among the people who did the work).

4. Many people were appalled at how the rules actually worked. The general view was that the EPA should have set "life of vehicle with realistic driving conditions" rules rather than tailpipe restrictions for newly built cars. Of course, the standards would have to have been higher (more NOx and CO per mile). However, actual emissions would have been substantially lower. The perceived obstacle to making this change was the environmental community that demanded (and got) the status quo.

There was no fraud back then (at least none that I saw). The VW (USA) people were as good, or better, than any American car company (the Japanese were predictably excellent). I am just as shocked as anyone with respect to the recent news.

Yes, it can be used to tax foreign companies through excessive fines, thereby giving the home team an advantage. It has happened in other industries before. While international trade agreements limit subsidies and import duties, they unfortunately do not limit fines.

VW = BP: fine them furriners.

I think this is a case where looking for alternative lessons is less than useful.

A "defeat device" is a straight up rejection of social responsibility, and thus earns social reaction.

And yes, doing it for a million cars seems greater to people than one kid doing it to one car in New Jersey.

Didn't we read on this blog a while ago that you couldn't run a polity without a sense of fair play? This looks like over analysis in that context.


"Didn’t we read on this blog a while ago that you couldn’t run a polity without a sense of fair play?"

A great many readers of this blog would appear to agree. The authors? That's questionable.

Ha! I knew it!

I wrote on my own blog over the weekend, and again on Tuesday that it was driving me batty that, back in February, I had come across an article that suggested that it was common knowledge that automakers use defeat devices, and now everyone's springing into action and acting as shocked as Captain Renault was that there was gambling going on. These links, at least, start to explain that puzzle.


"this is The Guardian, in February, citing unnamed “campaigners” who cite exactly what VW has done, as a known fact." So what? (i) The Gruaniad talks tosh most of the time: why believe it this time? (ii) Anyway, it doesn't much matter whether you or I happened to believe it: the USA presumably depends on the EPA to protect it from dastardly furriners, and it had not spoken.

On pollution and harm to individuals, again it is worth noting that there seems little correlation between pollution levels and life expectancy. Hong Kong for instance is quite heavily polluted but has some of the longest life expectancy in the world (and very low health expenditures on GDP per head).

Probably the pollution controls imposed on diesels were a net negative for society because of extra fuel costs and actually VW were improving overall welfare with their defeat code.

Legally I also wonder what the charge against VW will be? Afterall it's not their fault that the US testing regime was flawed.

Exactly. How many publications will actually mention the standards made the vehicles less fuel efficient.

The costs of air pollution are calculated here: http://www2.epa.gov/sites/production/files/2014-10/documents/sourceapportionmentbpttsd.pdf

While it is suspect, I don't have a better model. Whether VW was increasing welfare probably comes down to whether somewhere between 50M and 200M / year in benefits were created over the best next alternative. What I do find 'interesting' is the size of the potential fines 16B vs the damage 200M for the final year, and that is using aggressive models.


Read the EPA report. It is based on grossly inflated estimates of the value of human life and health.


Los Angeles had terrible smog up into the 1980s, yet in the 1960-70s it was the sports and health nut capital of pretty much the world.

I doubt that those sick with respiratory problems were flocking to LA in droves.

They all moved to Boulder.

"Hong Kong for instance is quite heavily polluted but has some of the longest life expectancy in the world (and very low health expenditures on GDP per head). "

That's so simplistic. You might as well start saying that "it is worth noting" that smoking cigarettes doesn't seem to have much of a negative impact on public health if you look at Greek life expectancy. In my opinion, 10,000 hospital admissions and 3,000 deaths per year in Hong Kong due to pollution is a big deal.

The basic legal charge has already been made by the EPA. Violation of the Clean Air Act by Installing defeat devices, maximum civil penalty of $37,500 per vehicle. The penalty will be on the high end, because of the criminal mental state, the initial deception when confronted by US regulators, and the outcome of allowing NOx emissions 40 times emission levels, which in turn will be converted to a claim of statistical deaths and increased medical costs.

There could be additional charges, but this single, uncontested one may be sufficient. VW is probably going to have to back back all of these vehicles, because the fixes won't be acceptable. Criminal charges could be brought as well against individuals involved, but that may involve difficult foreign relations issues.

The interesting part of calculating the civil penalty is that VW would be expected to pay the amount of any competitive advantage gained by non-compliance, plus some multiplier (e.g., 2x or 3x). If cheating is widespread in the diesel car market then this factor might be zero, but that assumes different car markets.

The penalty will be on the high end because Krauts.

The penalty will be on the high end because VW workers just voted down the UAW.

ChrisA would be right, except for science. "diesel exhaust is one of the country’s greatest sources of toxic pollutants and leads to 21,000 premature deaths each year"


The people are healthy because they do a lot of walking and because of their diet - it is in spite of, not because of air pollution.
The Hong Kong Medical Association estimates that air pollution can exacerbate asthma, impair lung function and raise the risk of cardio-respiratory death by 2 to 3 percent for every increase of 10 micrograms per cubic metre of pollutants.[4] Studies by local public health experts have found that these roadside pollution levels are responsible for 90,000 hospital admissions and 2,800 premature deaths every year (https://en.wikipedia.org/wiki/Air_pollution_in_Hong_Kong)
It's also become significantly worse over time due to the industrialization of the area around Hong Kong in China, and these are effects that build up over your lifetime of breathing bad air, so we'll see if that lifespan starts to drop.
People in Beijing lose several years off their lives due to the heavy air pollution.

I don't understand the reasoning behind (2) anyone want to explain it?

He's pointing to the difference between 1st, 2nd, 3rd degree whatever (murder, assault, etc).

1st degree murder is roughly murder with intent by planning
2nd degree murder is murder on the spur of the moment, typically in anger
3rd degree murder is typically a death that occurred unintentionally, say a fist fight that ends in death, or killing someone with your car while texting.

Many shades of gray exist for each of those. Is it worse to be a contract killer, or to hire a contract killer? Seldom have both been judged equivalent in my lifetime, but which is worse has switched. The contract killer tended to be less objectionable when Milton Friedman's view of business as being amoral dominates - killing is just a business deal, thus the person who buys the murder is much more evil.

You sounded rational until the last paragraph. Good progress!

The various murders have punishment which scales as one would expect, with murder 1 having the largest punishment, murder 2 being a lesser offense, etc.

It seems that Tyler was arguing the opposite, somehow. I just don't understand his core argument.

Imagine if murder 1 had a solve-rate of 100%, but murder 2 was only solved successfully 10% of the time. A harsher punishment for murder 2 might make sense (is the argument).

There is still a difference between deliberately breaking the law, lying about it, and covering up the evidence and skirting the limits of the law.

A few years ago Ford changed its EPA fuel economy estimates on several hybrids because customers' real world experience was not matching the numbers. In Ford's case, it did not break the law or install a defeat device, it just engineered it's cars to do well during the EPA test. Of course customers noticed this inconsistency so Ford adjusted the numbers to more real world circumstances. It's the difference between cramming for a test and forgetting everything afterwords vs bringing notes into an exam to cheat off of. In both cases the person doesn't really know the contents afterwards.

Neither situation is ok, but I think most people agree that VW's behavior is worse.

Sure, and in 2008, they changed the test to deal with similar not-quite-cheating on the behalf of Toyota, dropping the Prius from, I believe, 60 to 48 mpg. Turbos are coming in for the same sort of critique today. My (German) turbocharged car gets nowhere near the advertised mpg.

But I think there's a difference between the hybrids being designed towards performing well on the test and not the real world and literally turning off the emissions equipment outside of the test environment.

And continuing the test-taking analogy, it's the difference between elementary schools 'teaching to the test' on standardized exams, vs. the Atlanta teachers who changed students' answers to improve their scores. Both cases subvert the goals of standardized testing, but I think everyone agrees the Atlanta teachers' behavior was much, much worse.

But VW never changed the answers. Their cars actually got those results.

If you want to get those emissions level, just plug something into the OBD port and you'll be gtg. The problem is, nobody actually wants those emissions levels.

I'm not sure Ford did anything wrong. All vehicles are designed to the EPA test, and accurately reporting the test is not misleading. If, Ford hybrid owners are more sophisticated/demanding than the tests, it was responsive of Ford to meet their demands.

This is Ashley Madison for car companies. The calculated impact of the fraud shows that added Nox/Sox are less dangerous than selfies.

I'd get popcorn, but I'm teaching all day about questionable research practices and fraud. A few quick comments:

I believe Becker argued that the ideal punishment system would be draconian punishments applied with a vanishing probability. All the benefits of deterrence without the cost of punishment. Great economics, but bad psychology. Sure swift punishment is far more effective.

The comparison to Greece is well suited to this article, because this apology for VW makes me think "this way lies Greece", with its widespread corruption. Maybe you don't like this regulation, but your argument would apply far more broadly than you seem to think, and I don't think it leads to very appealing place.

Finally, don't forget the cost to shareholders, should regulators decide that intentional violations of regulations should be punished.

P.s. Glazer's law sounds interesting, but a quick google search yields no hits other than a bunch of glazer law offices, and a nytimes article about tax fraud, which doesn't seem to answer many puzzles not explained by "people will commit tax fraud if taxes are high and they think they won't get caught". Is that the law?

I couldn't find anything on google either. I imagine Glazer's point is that if you get an unexpected microeconomic phenomenon, it's either because taxes or fraud are distorting more rational or explicable behaviour. eg If I have to pay a huge tax bill to sell my shares or home, then it will influence my decision and so I won't sell.

Does he mean Glaeser?

"Sure swift punishment is far more effective."

What strikes me is the sheer irrationality of VW. They are potentially liable for $18 billion in fines in the U.S. alone (of course they won't pay that much). The class-action lawsuits will be billions more, and that is just in the United States. Remember, there is no fix for this problem, because the "fix" will lower gas mileage and performance, so it is conceivable that VW will be liable for refunding the cost of all 500,000 cars. (Tyler's framing of the issue understates this point--this isn't "just" evading a government regulation, but the defrauding of consumers who believed they were getting a fuel efficient, high performance car with low emissions). And then there is the loss of goodwill and trust. The damage will be in the many billions.

So what was VW thinking? That they would NEVER get caught? Even if you think the chances of getting caught was really low, this move could not have passed any sort of cost/benefit test. The market failure story here, in other words, was not that VW cheated, but that cheating could have never, ever have been calculated as a viable business strategy.

That's why I've found this story interesting. It's unbelievable to me that they thought they could get away with it.

Organizations are not well modeled as single rational actors, so one has to be careful when talking about "them." Some engineering managers probably really did get away with it, in terms of salary, bonuses, promotions for hitting targets.

I'd like to know how many people knew about it.

Presumably the ECU code is pretty well audited, and there's a pretty big group working on it. It seems hard to believe this could be one guy screwing up, like the GM scandal mostly turned out to be.

But, it is not clear that what they did was actually illegal. VW ran the stipulated test, and actually got the passing grade. It has long been known that the EPA tests are largely irrelevant to real world driving, and nothing stipulates that they get certain emissions in the "real world", merely that they pass the test, which they did.

How many times have you walked out of a final test in class, and promptly forgot everything that you were supposed to learn?

You can argue that it is morally dubious, but criminal is another matter.

The Law bans ACTUAL Emissions. The regulations just defines how emissions are tested. The cars must pass the test but if the test is insufficient, changes, or it becomes apparent that the engine does not meet the legal standards then the maker is financially responsible for ensuring that the engine conforms. Designing to the test is a gray area. The EPA is generally not willing to take a manufacturer to court to correct minor deviations but the engine makers are still required to technically meet the standards promulgated and are taking the risk of being found to be non-conforming.

The intentional nature of the act is what makes it so flagrant.

The mpg reporting is about marketing and the standards of testing procedures not any actual legal requirement. They are required to list the fuel efficiency and meet feel efficiency standards but the tests are the actual standard. What the average mpg of a vehicle is isn't easily able to be determined in an objective way. The test is just the open way that the average mpg is determined and the test is open to notice and comment procedures and are developed. So mpg standards are defined by the test.

Otoh emissions are an easily determined objective fact. The LAW itself defines what is allowable and an engine that does not conform is illegal unless it meats certain exceptions. If the problem is due to a design flaw then the engine maker is required to pay for the fix and is subject to penalties if the flaw means all similar engines emit more pollutants the allowed. The biggest loophole is that conformance becomes the consumers responsibility if it is outside the "life" of the engine which is fuzzy and undefined.

Designing to the test is a gray area.


You seem confused. While doing the test, the REPORTED emissions on the VW cars are what was ACTUALLY emitted. They never actually lied, they just retuned the engine. The difference is what the emissions are when not doing the test. These are different for every car ever made.

Also, VW's scheme actually made their reported mpg ratings worse, not better. So, you can't get them for fraud in marketing, because the consumers got a better vehicle than what was advertised.

Yeah, I think there are two elements, one is the specific criminal intent involved with the actions, but the other is the audacity of creating a device that once it leaves your control can be studied. Sort of like leaving the weapon at the scene of the crime knowing there are fingerprints.

That it appears European watchdogs brought the information to U.S. regulators suggests that they knew the local constabularies wouldn't be bothered.

Maybe VW imagined they could bend US decision-makers to their will just as they do EU decision-makers, but neglected to pay off Congressmen suitably.

This case is interesting in light of the fact that automakers have fought so hard to keep their code hidden from academic researchers. They mostly use the digital millennium copyright act (DMCA). This copyright law prohibits researchers from reverse engineering automakers' software even for legitimate research purposes. Perhaps we now know why automakers are so keen to use this law against researchers, who by most accounts are just trying to protect consumers by exposing software vulnerabilities.

Interesting; I just assumed the algorithm was difficult to flush-out through reverse-engineering, and beyond the capabilities of most consumer/environmental watchdog groups.

That's because VW is not a person . The executives who decided to go with this, calculated that there were to be personal gains for them, And that in the long term, even if they get caught, it will be someone else's problem. Sure they get fired, but they get their severance pay, they already collected their bonuses, and don't need another job so they go on into a very pleasant retirement.

Pretty much what happens with those high flying hedge fund traders, if they get it right they win big commissions, if they get it wrong some one else looses money (they may even still collect fees), if they get fired.. well.. they are already rich.. they go to early retirement.


But, but... The Market.

"but the defrauding of consumers who believed they were getting a fuel efficient, high performance car with low emissions)."

If there comes an optional fix, free to owners but it will reduce the pollution and harm performance. I would be willing to bet that most owners will not elect to have the fix performed on their car. If this is true, then owners should see increased resale value since VW will not be able to sell any more new cars containing that 2.0 TDi engine.

The car won't pass emissions w/o the fix. (at least in states that require an emissions test)

"So what was VW thinking? That they would NEVER get caught? Even if you think the chances of getting caught was really low, this move could not have passed any sort of cost/benefit test."

I disagree. I've worked in regulated businesses and can tell you why VW thought this would work, and why it somewhat makes sense. The reason is that regulators are mostly lazy bureaucrats, especially when it's something they really don't care about (and if regulators actually cared about NoX emissions, they'd care about how bad the emissions are in real-world conditions, even in cars that don't behave differently under tests). Their objective is above all else to show that they did their job, but without much effort. I've been involved in external software audits and they find trivia. They never find the holes that I know are there, but take real effort to figure out. And they've got a report with a few defects on that mean that they can show they did their job.

The reason VW got caught is because of an NGO that forced the regulator to do their job properly. Regulators again respond to this. Not because they care, but to show they're doing their job. And VW just hadn't accounted for that NGO existing. Without them, yes, they probably would have gotten away with it.

What was VW thinking? Competition and the drive for profits in a "free market" cause corporations to act badly. Ideologues like Cowen are paid not to get this. They're paid to spread propaganda. Nothing in his blog post makes sense.

3. Absurd double speak.

The subsidy is
- allowing unrestricted burning into the same atmosphere we all breathe
- allowing unrestricted use of public streets
- zoning codes that require massive parking, guaranteeing excess supply
- foreign policy aimed at cheap oil
And on and on.

What is it with economists and cars? They are willing to slaughter sacred cows left and right in every human endeavour, but as soon as the topic of cars comes up, they line up to parrot the party line and ignore massive subsidies.

Utterly pathetic. If you believe VW pollution is so harmless, I await your move to a corner lot at a busy intersection where you can breathe it in day and night.

Ahh, but corporations are people, my friend!

Right, TC?

If you live in a metro area of 1M+, you already are. Unleaded gasoline, catalytic converters, fuel injection took care of a lot of bad emissions already. We're scraping the bottom of the barrel.

Understand, I despise so many cars and roads as well, but a lot of this is people chasing (even creating) good school districts and a deliberately engineered population increase via immigration. If that's the world we're going to have, then people need cars. Replace all that combustion with batteries and you better start building more nuclear reactors. But few people like to think too hard about any of this.

Car culture was one of those 50/60s style Bright New Future ideas like blowing up nuclear weapons in space. Unfortunately, after integration and urban renewal, we're stuck now with huge roads that will be extremely expensive to replace for very little ROI.

Really? Roads have a low ROI?

Considering that the price charged for the "product" is zero and the opportunity costs of the land (not generating property tax), the capital costs, and operating costs are very very much non-zero, yes, roads generally have a very large negative ROI.

Property inaccessible by road might not generate as much property tax as you seem to imply.

Yeah, I think David B has it.

New roads effectively make new land.

I'll save this post to illustrate the concept of Tragedy of the Commons, many thanks.

Most new roads and road expansion TODAY has negative ROI, very negative ROI as most of the low and even not-so-low hanging fruit is long long gone. At the margin new road investments in the developed world are very poor investments where most of the benefit flows to a very limited group of people. The amount the US spends to subsidize rural living is fairly large especially at the state level where small interest groups have much more power.

This is true for developed countries and poor countries where ROI on paved roads are especially poor due to corruption and rent extraction. Electricity infrastructure is by far the best ROI investment in the poorest countries. In the developing world the evidence suggests that paved roads are spectacularly good investments that far outstrip private capital investment in terms of future gap growth.

tldr; roads are usually the best possible public or private investment possible for middle income countries in terms of GDP growth. In developed countries the fact remains that new paved roads are one of the most wasteful forms of government expenditure. All the good roads have been built. Maintenance expenditure is a different question.

The 2011 Hyundai Sonata was rather improbably advertised as coming with a 2.4 liter 4-cylinder engine that generated 198 horsepower. The 2015 Sonata is advertised as 185 horsepower.

How honest was that 2011 number?

"Advertised HP" has been one of the most rubbery figures ever produced. Engineers set it, marketing and sales play with the numbers to boost sales.
HP can be measured with accessories fitted or removed. Naturally, an engine operating with normal accessories removed, is going to produce more HP.
HP can be measured from a selected engine that is "blueprinted" (i.e. - carefully assembled with every component meeting specifications precisely, and even balancing all rotating components).
HP can be measured by utilising a premium fuel instead of the recommended minimum octane/cetane fuel.
HP can be measured by avoiding an SAE standard and introducing a "manufacturers standard" which then produces more HP as a final result, due to a differing measurement method to SAE methods.
HP output as tested by the manufacturer (without external oversight or audit) and HP as advertised by the manufacturer in brochures, is a figure straight out of Fairyland.

Using a premium fuel would decrease HP...

depends how the car is designed.

The Society of Automotive Engineers has a new test for horsepower, they are essentially certifying horsepower claims. It is possible that Hyundai rerated their engines to this new test, which probably would de-rate the engine.

If I recall correctly there are competing standards for horsepower, with DIN being somewhat conservative, SAE being in the middle, and the Japanese measure (JIS?) being somewhat high?

Whats so improbable about a 198 Horsepower 4 cylinder?

Hey everyone look at those yellow men over there. Pay no attention to malfeasance by my aryan brothers.

Could be perfectly honest. There are several reasons that the new engine could have lower peak horsepower than the old one, such as lower cost, increased efficiency, or improved off-peak performance.

Could be, but the 2011 Sonata didn't perform like it had a 198 horsepower engine.

It's a good car of the appliance type, but it just doesn't perform like a purported technological breakthrough in getting unprecedented horsepower out of a small engine without turbocharging.

Hyundai marketed it to people who shop for cars online by comparing columns of specs. The claimed 198 horsepower 4 cylinder engine made it stand out when matched up against 4 cylinder Camrys, Accords, and Altimas.

> We are more outraged by deliberate attempts to break the law, compared to stochastic sloppiness leading to mistakes and accidents. But it is far from obvious that the egregious violations should be punished more severely in a Beckerian framework

I disagree with this; I think our moral intuition is quite Beckerian-optimal here. For deliberate attempts to break the law, if you set f*p high enough, the equilibrium level of crime should be very close to zero, and so the negative utilitarian impact of the penalties themselves will be small. For stochastic sloppiness and mistakes, each individual instead has a choice on the level of care they exercise to make sure some event does not happen, but even with high (ie. efficient) levels of care the probability that a slip up will happen is well above zero, so punishments will take place.

This scandal very much calls into question the assertion that "diesel engines are 95% cleaner since the 1980s". A 95% reduction is a reduction by a factor of 20. But post-scandal reports say the real-world emissions of these cars are about 20 times higher than the lab results. So if that 95% reduction claim is based on pre-scandal lab results (the link is just to a newspaper article that doesn't provide a citation trail), the real-world emission reduction since the 1980s could be approximately zero.

"Cleaner" is an absurdly underdefined term. Does it refer to CO2 (which doesn't matter since Global Warmmongering is mere fraud), particulates (potentially nasty from diesel engines), NOx (which I assume to be potentially nasty but don't know much about), or anything else?

NOx reacts in the atmosphere with sunlight to form both smog and acid rain (bit of a simplification but more or less true). Diesel is cleaner in other applications because they use urea to reduce the nitrogen emissions but this requires keeping another fluid stocked in the car and ads to the overall automobile cost. Part of what made the VW's "amazing" was that they reduced the emissions without the use of a Diesel Fluid system which turned out to be untrue.

This was my thought, too. Based on numbers that are known to be cooked, Diesel engines have 95% less pollution than before. I wonder what the real number is.

The BMW diesel tested had 1/20th the NOx emissions of the VW. Particulate and NOx is 1/20th what it was in diesel vehicles built in the 70s and 60s.

Are you excited about making the playoffs? How much CO2 are you and the Dodger going to produce flying back and forth across the country? :-)

So Greek GDP ~ German Car export ~ Apple Inc revenues.
Just to put those numbers into yet another perspective.

My understanding is that the software is specifically designed to recognize an emissions test, and changes usage to "pass" the test. There is hardly any possible way to construe this other than guilty as hell.

What boggles my mind is that such a large company could have even dreamed that they could get away with this in the longer run.

Also, when considering the Beckarian framework here, I think we have a rare case where it might actually apply. I don't think that many criminals are very "rational", so we probably need a fairly high probability of getting caught. Firms, however, should be expected to be highly calculating in their ways, so we should expect them to respond better to the "low probability high penalty" combination that might be assumed from Becker.

But, if other companies are doing this too, then VW should certainly not be singled out. Even if their algorithm is somewhat better at tricking regulators, isn't "justice" very nearly as much about intent as outcome? All manufacturers who even tried to do this should be punished equally - VW shouldn't be singled out for special treatment just because they were better at it.

By your reasoning, wouldn't a massive fine to VW spur those other rational car manufacturers to cut back on shenanigans? I believe that is the whole point of the "low probability/high penalty" framework you say should theoretically work for car manufacturers.

I agree. I think I'd misunderstood that other firms were already known to have done the same thing, whereas perhaps they are simply known to use many tricks to juice the numbers.

We're going to find out very quickly. Every ECU code is going to be poured over by more than the usual group of tuners.

I suspect, given the audacity of this cheat, that it's probably unique.

@Nathan W My mind is also boggled that VW could think that they could pull off such a vast fraud. Aside from the moral issues, no rational CEO would have condoned this fraud because of the wildly negative risk/return to the company.

That's why I suspect that this fraud was committed by a small group within VW's engineering department -- perhaps 10 individuals or less. I worked in a Federal agency where a few computer "gurus" created a large cross-cutting program that no one else understood, and it took years to realize that their program was mostly smoke-and-mirrors, by which time the gurus had moved on.

With zero actual information, your explanation seems exceedingly likely.

German defense mechanism: engage.

The Devil made them do it. That's essentially Cowen's explanation for the behavior of the Germans. And it's always his explanation for outrageous behavior of business and individuals. Eliminate government regulations, eliminate taxes, and business and individuals won't be tempted to sin, and therefore can't sin. There, problem fixed. It's not unlike the Protestants, Paul being the first true Protestant, who chafed under Jewish Law, and then under the leadership of Peter and James in Jerusalem, and who preached that salvation didn't come from adherence to law of any kind, not Jewish Law, not the good works taught by Peter and James, but entirely from faith, faith in Jesus as Savior. Martin Luther merely replicated what Paul taught, in Martin Luther's case, he chafed under the rules adopted by The Church. Eliminate the rules and eliminate sin. All that's left is faith. There, problem fixed.

Exactly. That's the libertarian excuse. Rob a bank. Well, it wouldn't be a crime if there weren't dumb laws against bank robbery.

This post is just some sort of bizarre effort at contrarianism on the VW mess. I can't believe Tyler is serious.

Is he preaching to the choir?

I can't imagine some young person who is examining the issues for the first time falling for this crap.

It ain't just cars. There's plenty of fraud in other little-understood mechanisms, DNA testing, atomic absorption testing, breathalyzer machinery, lie detectors, even finger printing. Climate analysis is a particularly fertile field for fraud.

VW has a 22% market share in Germany. Over 50% of these new cars are diesel, thus 11-12% of total new car sales in Germany are VW diesels.

If 12% of new cars are "heavy polluters", how strong is the link between strong regulations and measured air quality? If you look at trends in annual mean concentrations of NO2 (nitrogen oxide) in Germany, they go down. http://www.eea.europa.eu/themes/air/air-pollution-country-fact-sheets/germany-air-pollutant-emissions-country-factsheet

Questions arise, a) if VW haven't lied the descent in NO2 pollution would be faster? b) old cars pollute more than new "heavy polluters"?

The VW scandal (if badly managed) can also affect the regulator's credibility , the claims that standards have an strong effect on the air quality.

nooooooo, I wanted to comment at the bottom.

Axa, I understand that quite a high percentage of European diesel is actually bio-diesel (vegetable oil sourced). I have read where 40% of public transport diesel in Europe is bio-diesel powered. I don't know the bio-diesel percentage figure for private-use diesel. Bio-diesel is quite a bit cleaner as regards NO2 exhaust emissions (this is the main driver for bio-diesel-fuelled public transport in Europe) - thus the overall NO2 annual mean concentrations may be trending down, because of the increased use of bio-diesel in Europe in recent years.
I understand that the U.S. also uses bio-diesel in some diesel-fuelled public transport, and lower levels of emissions are again the driving force there.


Well, I made a quick search and ► Use of biodiesel usually, but not always, increases NOx exhaust emissions. ► Fuel composition, engine technology and operating conditions all affect NOx. ► The biodiesel NOx effect can be mitigated by changes in engine operation parameters.

So, using biodiesel blends and software tricks actually sum together to increase NOx emissions. However, what has been measured is decrease in NOx levels.

Why on earth would anyone want to commit fraud in climate science? Any answers that don't invoke broad conspiracies across unrelated groups of researchers?

It is well known, in all branches of science, that null results simply don't get published.

What's the equivalent of a "null result" in climate science?

We're talking positive high probabilities, generally p>0.99. So ... a scientist has a finding of only 90% probability of 2C warming in the century. AND (imaginary) his model is credible.

He's an instant millionaire if his model is credible, because every oil company on the planet will hire him on the spot as the top spokesman.

BUT, this man doesn't exist, because all of the models come up with p > 0.99 (give or take).

Blasé results that show no significant correlation is a null result.

If there were lots of null results, the fossil fuel industry would be trumpeting this far and wide.

How come I haven't heard of them?

>>Why on earth would anyone want to commit fraud in climate science?<<

Do you want your kids to think what you are working on is important? Do you want your wife to understand why you are working late all the time? Do you want your mom and dad to be proud? Do you want to be respected by colleagues? Do you want to go on TV and get asked about your work? Do you want magazine articles written about you?

Outside of those things, I cannot imagine why anyone would want to commit fraud in any type of research. But strangely, there's a lot of people in all branches of science/medicine that have oversold what they have.

Do you want to be the favourite scientist of the biggest and most profitable industry on the planet?

If your explanation were correct AND science were being done poorly in the pro-AGW group (basically ALL climate scientists, but never mind that for a moment), just imagine how much money big oil/coal would give to anyone with credible research showing how it was all bunk!

Instead, there is a small number of outsiders who question the results, and, here's the clincher ... the quacks aint rich. If AGW was bunk, the anti-AGW scientists would be raking in millions from oil and coal to do better and better studies to show that it's bunk, BUT THAT AIN'T HAPPENING.

A scientist--Dr. Soon--featured prominently as a "big oil" scientist in a full write up by the NYT in Feb of this year was shown to have got $1.2M over a decade for his research. In other words, about $120K per year. If there were a scientist raking in much higher sums, you can bet the NYT would have cited that too.

On the flip side of that, we just learned a leader of the letter wishing to use the RICO act against naysayers has a non-profit that has received $3.8M in gov funding, and he (and his wife!) both pulled in $499K for part time work for the foundation. That was just for 2014.

Turns out that since 2001, this firm has received a staggering in $63M in funds it was reported last week, leading to $5.6M in payments to the husband and wife leaders of the non-profits. And the daughter is also on staff. This researcher also pulls in $750K/year from his university.

I'd say the pro-warming crowd is raking in considerably more than the big oil crowd. All while working part time and giving jobs to the entire family. Please, drop this noise about money corrupting the science. And tell me honestly: Aren't you a little surprised that over a 10 year span a single scientist and his family has been enriched by more than $6M in personal compensation from $63M in grants that all came from the taxpayer? You must admit, that is pretty freaking excessive.

Now, find me a big oil scientist making that kind of cabbage and we can talk more.

And BTW, Dr. Soon's figures are grants. He doesn't just put that in the bank. On the other hand, the $6M figure DID go into the personal account of the pro-warming scientist.

Interesting information.

I think the guy supported by the public grants is making "too much" money for his work, but that doesn't necessarily invalidate his findings, it just means he's overpaid.

From what I can find online, it looks like Mr Soon doesn't actually produce much research of value, and instead insists on picking holes in other people's work. This is valuable, of course, since such irritants will force researchers to do better work. But the fact remains that he has not produced any reputable model which, for examples, finds p < 0.99 for AGW. Even at p=0.90 ... would it be conscionable to do nothing? Open question. Expected costs and benefits sort of question, and the field of economics has the best tools to answer just this kind of question.

While I fully accept your counter-information to my original logic, I think it is worth emphasizing that it is perfectly natural (common sense?) to be highly suspicious of "independent" research supported by industry which a) promotes the position of the industry and b) runs counter to work being produced by the broader scientific community.

Really though. Do you believe that the government WANTS to produce BS research in climate science? Wouldn't Obama, or just about any politician, just LOVE to be relieved of the necessity to act on AGW? What possible motivation could there be for rich countries to PREFER research that supports the AGW consensus? I would think that people would be greatly relieved to find that some newer and better research could explain to us why there's nothing to worry about.

Oh, and C02 is a smoking gun. It is a greenhouse gas. That's why Venus is so hot.

>>I think it is worth emphasizing that it is perfectly natural (common sense?) to be highly suspicious of "independent" research supported by industry which a) promotes the position of the industry and b) runs counter to work being produced by the broader scientific community.<>Do you believe that the government WANTS to produce BS research in climate science?<Wouldn't Obama, or just about any politician, just LOVE to be relieved of the necessity to act on AGW? What possible motivation could there be for rich countries to PREFER research that supports the AGW consensus?"

You think politicians would LOVE to relieved of the excess money we give them to solve problems like poverty? We spend a trillion a year on means tested poverty, yet few are really poor and in fact have plenty of excess money to spend a lot on things like pot/booze/lotto/gadgets. Do you think Congress will be giving that money back soon? Nope. Every year we hear the problem is even worse than they thought and they need even more money.

"and C02 is a smoking gun. It is a greenhouse gas. That's why Venus is so hot"

Venus might also be a bit closer to the sun, eh?

Yes, CO2 does cause warming. And in the 90's scientists thought it could cause up to 9C warming per doubling in CO2. And then they learned about cloud and vapor feedback and cut their estimates in half.

If we're at the lower end of the IPCC range, we're going to be absolutely fine. I tend to think we're at the low end of the IPCC range. Make no mistake: I hate oil. I think battery backed solar can be huge and solve the baseload issue and I cannot wait for more cars to be electric driven by a clean baseload . But having managed hundreds of engineers, I can tell you it's human nature to over-estimate and over-state your understanding of a problem. Even while missing prediction after prediction, very smart people can still rationalize reasons why their understanding of a process is nearly flawless.


Nobody doubts that CO2 is a greenhouse gas and that, all things being equal, an increase in CO2 will produce some increase in surface temperatures. But increased surface temperatures are not bad and increased CO2 is actually very good. The only real issue is whether any plausible increase in CO2 would, on balance, cause an increase in temperatures which would be harmful to human life. The evidence now overwhelmingly shows that a doubling of CO2 is unlikely to produce a problematic increase in temperature. Assuming the increase has any noticeable effect at all (unlikely), it is more likely to be beneficial than otherwise.

The main reason Venus is warmer than Earth is that it is millions of miles closer to the Sun.

Yes, Venus is closer to the sun. But it is "too hot" for this explanation. The mystery was solved when it was learned that C02 levels are very high, which explains why Venus is hotter than the distance from the sun warrants.

bmcburney - "The evidence now overwhelmingly shows that a doubling of CO2 is unlikely to produce a problematic increase in temperature."

Perhaps you would like to believe that. I am unaware of this "overwhelming evidence". It would be nice if you are right, but the evidence is certainly no "overwhelming".

"Perhaps you would like to believe that. I am unaware of this “overwhelming evidence”. It would be nice if you are right, but the evidence is certainly no “overwhelming"

the IPCC has a lower bound of "very likely" temp sensitivity range of 1.5C to 4.5C. That means 4.5C is just as likely as 1.5C. And this for a doubling of CO2. Given the rate of technical innovation happening now, we can be assured that alt energy will be much cheaper than fossil in another decade or two. So, it's very unlikely, even with all the poor regions of the world coming on line, that will actually double. 600 is probably much more like it.

So, if we hit 600 PPM in 2100 and the IPCC lower range is true, then that's about a 0.75C temp rise. That is simple for man kind to cope with. Especially in 100 years when energy costs are much, much lower.

It's roughly equivalent to everyone migrating about 100 km south.

Do you not believe the IPCC?

This is not climate science though and the science is emerges long before climate science. Emissions controls would cause greater heating due to efficiency problems. The same thing occurred with many of the early CFC's and Ozone depleting substances which probably also had a cooling effect. Many of the chemicals that replaced CFC's are much worse in terms of warming.

Not all environmental issues are global warming related and their interactions are subtle. GW became an issue as many of these early issues with smog, acid rain, and ozone depletion were largely corrected or controlled and the environmentalist pivoted to GW as the major issue.

We are told that NOx emissions have serious health implications but Europe has significantly weaker regulations than we do and if you look at life expectancy and incidence of respiratory disease you can't see an impact. We are also told that CO2 emissions threaten human civilization if we don't dramatically reduce fossil fuel usage immediately. None of this is to excuse fraud on the part of VW but, if all this is true, wouldn't a sensible balance be to accept a bit more NOx for a lot less CO2?

If you don't believe them about NOx why do you believe them about CO2?

If you mean why believe VW about CO2, CO2 emissions are directly related to mileage and diesel vehicles can be directly observed to get better mileage than Otto cycle engines.

I mean you do not believe the 'experts' about NOx, but do believe them about CO2.

"We are told that NOx emissions have serious health implications..."

"Manipulated data will be a big story" says the man who touted the bogus sexual assault story just two days ago.

There is a certain irony in watching automobile manufacturers use "manipulated data" to satisfy emissions standards which are based on fraudulent studies of what would be "achievable" emissions/fuel economy standards mandated by government agencies in order to address spurious concerns regarding "global warming" which are justified by manipulated data.

Its "manipulated data" all the way down.

2014 was the hottest year on record.

July 2015 was the hottest month on record.

How do you manipulate that?

The temperature record itself is directly manipulated in two way. In general, the past is made colder and the present and recent past is made warmer. For example, the previous "hottest year on record" was 1998, followed by 2005, and now, as you point out, 2014. However, the overall anomaly is stuck at .6 degrees C. The boys at Goddard have simply "adjusted" 1998 and 2005 downward. They adjusted 1998 down to make 2005 the hottest year and the adjusted 2005 down for 2014. The past gets colder all the time but the anomaly hasn't changed significantly for 18 or 19 years depending on which data set you use.

But that is just the "tip of the iceberg" so to speak. The paleoclimate stuff is where the real distortions take place.

In addition, the "warmest year" was by a staggering 0.02 C plus or minus 0.1 C. So it could have been 0.08 C cooler or 0.12 C warmer, or anywhere between.

All of this without taking into account the data manipulation previously described.

If AGW were bogus, wouldn't the anti-AGW scientists (<1%) be fantastically rich, and be working on well-publicized and fantastically funded research, paid for by big oil and coal, to prove that it's all bunk?

Instead, what you get is this: every few years someone finds a chink in the armour and says "there's a chink in the armour. See? There's no armour". And meanwhile the rest of the world can see plain as day that it is a mere chink in the armour.

Unless you're a right wing American, that it.

I don't know of any logical reason for supposing that because "anti-AGW scientists" are not rich therefore AGW theory is not bogus. However, the implied assertion that coal and oil companies pay "anti-AGW scientists" or that their research is "well-publicized and fantastically funded" has no factual basis whatsoever. In fact, "crony capitalist" companies make more money on boondoggles like solar panels, wind farms, ethanol and, of course, "clean diesel" than they would make in legitimate businesses and, as a result, corporate funding for groups supporting AGW theory is an order of magnitude larger than funding for opposing groups. Government funding for pro-AGW theory is even more lavish than that.

More importantly, your analogy of "a mere chink in the armour" (sic) is both factually inaccurate and demonstrates a failure to understand how science works. If you have a theory and I find one little problem, one point at which the data contradicts the theory, that means your theory is wrong. You can modify the theory, or show that the issue I have raised conforms to theory when properly understood, but one tiny little contradiction can invalidate the most beautiful theory ever devised. That's how it works or, at least, how it used to work. At this point, however, we are not talking about a few small contradictions. For nearly twenty years, CO2 concentrations have risen at a fairly consistent rate and surface temperatures have not changed at all. In any other field of science, this would be enough to end the discussion. Only in AGW "science" does the theory refute the data and you proudly claim that you can "see plain as day" that the theory is correct despite the evidence. Ok, if that's what floats your boat. Just don't pretend that its science.

"and I find one little problem, one point at which the data contradicts the theory, that means your theory is wrong ..."

I.e., you have zero understanding of weather or climate. You're like people whose opinion of AGW varies with the weather.

By not understanding the significance of error bars on measurements.

Regarding #2: It is appropriate for us to be more outraged at a deliberate attempt to flout the law. While both purposeful and accidental violations cause pollution, purposeful violations additionally represent a breakdown in order. It's like why we're more outraged with murders of witnesses or police officers than we are when civilians murder each other.

Regarding #3: By saying "not just a market failure" I assume you're implying "...it's also in some ways a government failure." Is that right? The only way it makes any sense to connect the clean diesel program to this event through government failure is if the governments that pushed the clean diesel program tacitly approved of the defeat devices, perhaps in order to preserve their status or to make their clean diesel advocacy look less like a failure. Is that what Mr. Crook or you are alleging? Otherwise this argument sounds analogous to "you made me cheat on the test by valuing success".

My sense is that 'clean diesel' passenger vehicles are something European governments have been pushing and it's an area where European industry excels. It would have been easy for governments to insist on real-world emissions testing but they have not done so because they really didn't want to catch the manufacturers cheating -- they wanted to be able to keep their credit for lowering CO2 emissions and protect their local industries at the same time. The laboratory emissions tests that were easy to hack were the perfect arrangement for politicians and manufacturers (and consumers as well so long as they were happy in their ignorance). And now the earnest, bumbling, naive U.S. has gone and spoiled everybody's fun *again* -- and European governments are forced to feign shock and indignation through gritted teeth.

A nice hypothesis. Indeed, it is common to include CO2 emissions per kilometer in car sales publicity. The European Commission is proud about reducing this indicator: http://ec.europa.eu/clima/policies/transport/vehicles/cars/index_en.htm

Tyler is not maximizing his own utility. As a writer for SNL, he could easily triple his salary. And no one would need to know that the Bill Hader character spouting insane Republican economic nonsense is based on views he actually holds. Though I imagine Stefon would also claim that the government's reaction to this mess should be to get rid of the EPA.

There is a thriving business in aftermarket "emissions defeat devices" for diesel engines. These post-2007 emissions controls (EGR coolers, diesel particulate filters, Urea injection/ SCR) are expensive, unreliable, and kill your mileage.

You can go online and get "tuners" that turn all this crap off, or even allow the removal of these devices.

VW was providing a valuable service to their owners.

Valuable until they were caught. Now the owners of these VWs have illegal vehicles, easily identifiable by law enforcement, and at some point in time they will be forced to either reflash the engine control module with a significant reduction in performance or have installed a urea tank in the trunk and lose storage space.

I hope you're not a lawyer.....

"It is incumbent upon Volkswagen to initiate the process that will fix the cars’ emissions systems. Car owners should know that although these vehicles have emissions exceeding standards, these violations do not present a safety hazard and the cars remain legal to drive and resell. Owners of cars of these models and years do not need to take any action at this time."


That the EPA is going to force VW to make the fixes at its own cost does not relieve the owners of the responsibility to get their cars fixed. The Engineer is correct that the defeat devices were a betterment for the car owners since they would always pass emissions tests. But that benefit is now lost.

States and areas with emissions tests usually require proof that recalls have been performed. Other states will likely be forced to update their NOx state implementation plans to make sure recalls were performed, or else those states will be required to find NOx reductions to be made elsewhere. The owners are not going to have the option to keep the defeat devices once VW plan is implemented.

As a practical matter, I think VW will be compelled by circumstances to buyback the cars. The fixes will significantly reduce the performance or storage capacity of the vehicles, and will be difficult to implement in a timely, orderly fashion. Fiat/Chrysler was recently ordered to buy back 200,000 to 580,000 because it couldn't timely repair defects. The class action lawsuits and the regulatory actions can probably be greatly mitigated by such a buyback.

If one is willing to dig deep enough, one is going to find that the regulatory bodies in at least Europe knew what VW (and likely the other diesel-car manufacturers) was doing. This would explain why VW thought they could get away with it. The fun part of all this for me is going to be watching the epic tit-for-tat that is going to ensue as the US tries to fine the European manufactures billions of dollars (and this doesn't even include the multi-billions the same manufacturers are going to lose in the class-action law suits filed for the fraudulent gas-mileage numbers that are going to be found upon turning the pollution controls on during road use). I can literally guarantee you that the European regulators will find a reason to fine the US automakers an equivalent amount. Lots of popcorn at the ready!

I'd expect any tit-for-tat retaliation to be against big U.S. tech companies like Google and Apple rather than U.S. based auto companies. Except, of course, the Europeans have already been going after U.S. tech companies, so maybe this VW fine is already tit-for-tat.

Maybe- that is certainly where the money is, isn't it?

It's always a bit weird to see Tyler straight up trolling, like with #2. Like Alex said a few days ago, Becker was a nut.

We should be wondering why the EPA failed so badly here. The EPA has a $7B budget and 15,000. They could not be bothered to rent a car that was 2 years old and see how it actually was performing "in the wild"?

I mean, clean air is probably the #1 charter of the EPA, and cars are the #2 problem when it comes to clean air.

I'd think that validating this stuff while actually driving would be a top priority. But instead, we had to have some college kids with a $2M grant find this.

This is why gov oversight is such a waste of money.

Shouldn't you draw the same conclusions about corporate oversight? VW had an even bigger budget and workforce, and yet was somehow unable to detect the nefarious conduct of its own employees.

Attempting to draw anti-government conclusions from this incident is simply motivated reasoning. The only lesson here is one that security experts have known for a long time: every system has a flaw.

if this practice was industry wide (see the PDF I linked to below), then why would you expect anyone to behave?

Not sure I follow your argument. But three thoughts:

1. "If" it's industry-wide is a pretty big logical leap. I wouldn't be shocked if VW weren't the only company to have done this, but there's no actual proof that anyone else did. So I'm withholding judgment rather than leaping to conclusions.

2, This was hardly "college students." These were professors at a university hired by a non-profit looking specifically at this issue.

3. The scope of the EPA is enormous. If they were the Car Regulation Administration, I would agree with you. But how much of their time is spent specifically on this function? A drastically smaller fraction of money than you imply.

1. There's absolutely proof others have done this. History is full of reports showing that real world measurements are much higher than dyno measurements.


2. Some were professors. Some were research assistants (aka students).

3. Yes, it's enormous. But some things are more important than others. Air quality is a top priority, and cars, behind electricity generation are a #2 contributor. So, if 60% of your charter is air, and 50% of that is caused by cars, and you have 15000 people, then in round numbers you might want to have thousands work on this. Instead of hassling a farmer in Wyoming about a seasonal 1/3 acre pond on his property.

Admit it: The EPA screwed up here.

You totally ignore his fucking point! The EPA could have uncovered this by simply testing some non-controlled VW cars on the road. Why this isn't done as a routine procedure is utterly fucking baffling!

I have two questions on point 1. I don’t understand the “everybody does it” argument. Why should we be less outraged because “everybody does it”? Also, if regulations don’t work, then why is LA’s air quality so much better now than before regulations were implemented?

@David White - I don't know why you should be less outraged because everybody does it, but the law recognizes that if everybody does it, then it becomes normal. This is done in both pornography ("community standards" differ in North Hollywood vs Peoria, so what is deemed obscene varies by community), and in property laws ("coming to the nuisance" meaning you cannot sue for nuisance if you move next to a pub that for years is known to make noise at night.

TC: "When I was a teenager (maybe still?), it was commonly known that New Jersey service stations would help your car pass the emissions test if you slipped them a small amount of money." - LOL, my sister informs me that this is still the case...in clean, green, Northern Virginia.

it was commonly known that New Jersey service stations would help your car pass the emissions test if you slipped them a small amount of money.” – LOL, my sister informs me that this is still the case…in clean, green, Northern Virginia.


Pollutants emitted by a modern car are about 1/100th that of a car from 1960. There have been massive improvements. But when a pencil pusher in DC says "We're going to get MPG up to 55 real soon" without understanding why that is hard to do or what that means, then you end up in with everyone cheating and the EPA knowing it.

Here's a PDF from 2014 noting that real world measurements in EU are about 7X higher than limits. In other words, there is no connection between dyno testing and real world. Why? Because a lot of car companies are sensing the dyno and acting differently. AND the regulators know about this and have known about it for years. This 2014 PDF wasn't the first time this was brought up.

So....who is at fault here: The gov agency that published numbers that didn't mean a thing, had zero attachment to reality and that everyone ignored...or the one car company that was "caught"?

The job of the EPA is to oversee. They did not. They watched while an entire industry ignored them. That suggests the EPA was complicit in all this.


Complicit? VW installed a device specifically to prevent EPA from discovering actual emissions.

No, VW had a mode in their software that detected it was on a dyno and acted differently. That didn't prevent the EPA from driving the car and measuring the output of the tailpipe. That would have revealed precisely what was going on. They aren't curious? In the least? And this appears extremely wide spread per the PDF I linked. And you can go back much longer and find similar findings.

So, if it was widespread, and if the industry and academia all knew that real life didn't resemble dyno testing, then just what value is the EPA providing? Are they just rubber stamping feel good initiatives that have zero detachment from reality?

Yes, of course, they will feign outrage and levy big fines now that they've been shown (again) to be lacking in competency. But how did we get here in the first place? Why (again) are regulators always the last to know? Or did they know and just not care?

+fucking 100000000!!!!!

What is your preferred method for valuing human lives?

See how the value of life insurance that people tend to buy. What's yours?

So sorry that a company founded by the Nazis [German Labor Front] is in trouble.

Though I do admire their chutzpah

Greece GDP is actually about $200b. €179b, for 2014 or last four quarters ending jun 15.

8. The people harmed by this are likely to be poor and have no economic value anyway so whats the big deal.
9. if persons with economic value were annoyed by the extra pollution, they would be able to mitigate or eliminate the problem by the application of an insignificant amount of their money in remediation efforts (filters, moving to better locations, health care) which is less than the automaker was forced to pay to develop the technology.
10. It wasn't that the pollution problem could be solved, but it just took away some of the performance of the cars and really annoyed the marketing team who had a really cool campaign that would have had to be re-written.

The one matter that has me the most concerned is whether reducing the NOx emissions and likely decreasing the miles per gallon of the VW diesel engines to reduce smog will be worth the cost of marginally aggravating our CO2 problem and further adding to our global warming troubles.

Do we want more smog or more global warming? Smog is bad, and leads to additional cases of asthma episodes in children and adults with it, marginally shorter lifespans for the elderly in cities with smog problems, and other negative externalities, but Baton Rouge becoming beach front property is going to be a big disappointment to everyone who is not a fish in New Orleans. Smog is not a joke, but will decreasing the efficiency of these VW diesel engines and adding more CO2 to the air be a worthy trade-off?

Volkswagen the brand is NOT guilty, the employees are guilty. Whether it's collusion, or simply silence, they are all implicated.

These people have destroyed the trust their fellow human beings had in them.

Volkswagen might continue, after all if the brand can survive being created by the Nazis, it can survive anything.

However, fines should be imposed, class actions brought etc etc and the entire auto industry should be investigated.

If companies fold, so what? The humans who were in charge care not about others.

Consumers should extract maximum value whilst not caring about these companies.

Consumers are right to distrust any industry or business - Adam Smith pointed this out.

And by this reasoning, the EPA employees are guilty for the release of all the mine toxins into the Animas river? All the top leaders must go? And the ones directly involved in the Colorado incident?

The EPA's job was to make sure VW and other car makers were meeting promised levels, not just as on the dyno, but in the real world and not just on the day they were released, but year 1, year 2, etc. The EPA massively failed at this oversight. It took a group of college kids with $2M to find this problem. And that was after countless journal articles were published indicating how bad cars performed in the real world versus the dyno. The EPA budget is billions. They had the resources, they just didn't care to look.

How keen are you on seeing the EPA punished for their failures?

Yes, the employees of the EPA should be fired or else where is the accountability?

It's also important to note that there is a real but highly uncertain benefit from reducing CO2 emissions with more efficient diesel engines. This needs to be weighed against the human health cost from particulates and NOX emissions, and could balance out. . .

Fat chance. Catastrophic Anthropogenic Global Warming is a fraud: reducing CO2 matters not a whit. By contrast diesel pollution probably does matter: the particulates are probably bad stuff, and I presume the NOx is too. How many years of shortened high quality life they cost per annum in the US I don't know: whether anyone knows to better than, say, a factor of twenty I don't know either. I suppose the best way to find out is to do experiments on chimps.

Confession: I owned a US made (Westmoreland, PA) 1985 VW Golf diesel, non turbo, 80 hp. This substantially underpowered hatchback got 45 mpg around town; I could drive all week on $5, I really enjoyed the way the car drove, and it made cool diesel sounds. Aside from the outstanding mileage, the car was a piece of junk, with components like wheel bearings failing, parts that simply should not fail. This was the last VW I have owned.

I was not surprised to learn that the VW diesels cannot meet the US emissions standards, as:

1. BMW and Mercedes (and I believe Mazda) have struggled mightily to get their high performance turbo diesels to meet US emissions standards. They had to do a lot of "fancy footwork," including using the Urea diesel fluid and other engineering solutions that increased cost and reduced performance and mileage, and likely reduced long-term reliability, increasing maintenance cost. A real losing proposition. With diesel, until recently being significantly more expensive than gasoline, the case for buying a diesel BMW or Mercedes was simply not that strong, aside from the tremendous torque they generate, which can be a lot of fun.

VW, on the other hand, did not have to resort to these complex solutions to clean up their diesels. This fact did not really trouble me, but it was an anomaly and it registered in my mind. I though "perhaps they simply have figured out how to have clean diesels." Apparently they did "figure out how to have clean diesels," German (software) Engineering!!

2. I have noticed that many of the VW diesels emit a substantial amount of dirty exhaust when driving down the road. If the model is white colored they frequently have a lot of dirty soot and such across the back end of the car from the diesel exhaust. This observation also registered in my mind and as it was in contradiction to the marketing message of "clean diesels."

In summary, in retrospective, taking these 2 points together: a technological anomaly and what I call the "eye test," one could see, without running any sort of analysis, that VW diesels had some "special advantage" that enabled them to pass US emisssions.

In Colorado, we have these drive by emissions tests. Wouldn't these also show that VW (and perhaps other) diesels are emitting more emissions in real world operating conditions than specified? Another data point that is right in front of our eyes. Does anyone look at this data?

Sort of like steroids in sports, we know who is using them, just have a look at the athletes out there....Serena Williams?? does she pass the "eye test?" Rafael Nadal??
Any boxer?? MMA figher?? Most NFL players?? Open your eyes, as Yogi Berra said, "You can see a lot by just looking."

"In Colorado, we have these drive by emissions tests. Wouldn’t these also show that VW (and perhaps other) diesels are emitting more emissions in real world operating conditions than specified?"

In response to a hypothetical question about whether the vehicle would pass a state emissions inspection, the EPA's website claims that "It is unlikely that the presence of this device will cause your vehicle to fail. In fact, the defeat device was specifically designed to ensure that vehicles would pass inspection. The defeat device has been installed in the affected VW diesels since 2009."

In Colorado, we have these drive by emissions tests. Wouldn’t these also show that VW (and perhaps other) diesels are emitting more emissions in real world operating conditions than specified?"

While I don't know the details of this specific "defeat device", rumors of this have been circulating about many manufacturers for years. It has been noted that the best way to game the tests is to simply detect the presence of something connected to the ODB port, the little diagnostic port near your left knee. Basically all tests require this to be connected during the duration of an emissions test. So, whenever something is connected, you put the software into "diagnostic mode", which has the side effect of releasing fewer emissions.

Note here that this opens the door to a possible defense for VW. All modern cars are constantly re-tuning the engine and other systems for current conditions. VW could simply argue that in order to facilitate easier diagnostics and troubleshooting, the car simply goes into a "static" tuning mode for the duration that the ODB port is connected. Now, as long as those "static" parameters are occasionally (or briefly) used in real driving, then this is actually a somewhat reasonable technical decision.

As with performance enhancing drugs in sports, finding out that gaming the emissions tests is done widely by one car manufacturer should make you suspect that others are also doing it.

The best thing that VW can do know is to rat on other manufacturers doing the same thing, that way the outrage and punishment will get spread out among many.

"So how much extra pollution is Volkswagen's deception responsible for? And, since we know air pollution is harmful, how many additional deaths could those extra emissions cause?"

Well, the Germans are experts at killing people with poison gas. In fact, before they perfected the gas chamber they had roving death vans and killed people with exhaust fumes.

See: https://en.wikipedia.org/wiki/Gas_van

No Goodhart's law? https://en.wikipedia.org/wiki/Goodhart%27s_law

"“we’ve been overestimating the benefits of regulation”"

Very possible but how does the information about Volkswagen make that more likely?

"Remember that “clean diesel” was a government-led initiative, brought to you courtesy of Europe’s taxpayers. And, by the way, the policy had proved a massively expensive failure on its own terms even before the VW scandal broke"

So why do w not have a carbon tax?

Professor Cowen:

I am a big fan of your blog and your tight, logical reasoning in many instances where the commentariat and consensus views are devoid of careful thought.

On this issue however I must disagree with your arguments. Your title implies that Volkswagon should not be considered "as guilty" as the general public assessment. Leaving aside the question of whether there are "degrees of guilt" (I"d rather argue its binary - either they broke the law or didn't) your first three arguments boil down to:

1. Because other companies are doing it, and because the regulation isn't perfect, we should have less moral outrage at VW for deliberately deceiving regulators.

2. Because we have less moral outrage when regulations are violated through ignorance rather than through deliberation, we should have less anger towards VW

3. Somehow this is the fault of a government subsidy program and therefore VW is somehow "less guilty", or, alternatively, one could interpret your point to say because there are (purportedly) drawbacks to the regulation VW was violating, we shouldn't be angry at VW for violating it.

None of these arguments hold water.

In brief rebuttal:

1. Just because your neighbor does it, doesn't mean you should.
2. Because there are other reasons that regulations are bypassed/ violated in no way makes deliberate conspiracy to do so more acceptable.
3. This is what my father would call "true true unrelated." Who cares where it comes from? VW still knowingly conspired to break the law.


On your point about "degrees of guilt", you're conflating moral with legal guilt. Whether or not someone broke the law is binary - and even then, can be ambiguous. But that's not the same thing as bearing binary moral culpability.

For one thing, breaking the law is not necessarily indicative of moral guilt (e.g., if someone violates an unjust law), and many legal systems recognize charges that differ in degree (e.g., first-degree murder vs. second vs. manslaughter).

That said, I happen to agree with most of your other points.

It is blatantly obvious that intentional wrongs should be at least as criminal as negligent wrongs.

For if negligent acts are punished more severely, then the negligent can mitigate their actions by simply intending to do wrong.

It is the fault of DMCA http://www.wired.com/2015/09/epa-opposes-rules-couldve-exposed-vws-cheating/

It is obvious the emissions testing in Northern Virginia is a form of rent seeking. If you have an old car(before the late 90s) prior to mandated ECCMs (computers) they will hook you tail pipe up and objectively test for emissions. Most cars are newer than that though, and all they do is look for a light on your dash, and if you have one you need to do repairs until it goes away. Now the light on your dash is supposed to be a proxy for bad emissions, but most of the time the cars emissions are fine, its just the sensor itself that has gone bad and needs to be replaced. You can kick and scream all day demanding they hook your exhaust up and objectively test your emissions, but the law is the law, and this law is rent seeking.

Like others I find point #2 puzzling.

My guess is that the argument is that the purpose of punishment is to discourage bad behavior, whether it is intentional or just carelessness. Since intentional bad behavior here is harder than just being lazy it needs less to discourage it.

If that's the point, it's clearly wrong, since it fails to take into account the benefits of the bad behavior. Laziness doesn't get rewards, promotions, raises, etc. It doesn't increase sales. Intentional bad behavior - deliberately deceiving customers - can get all those things if it improves profitability.

Judge Judy and all mothers would say: "Absolutely guilty".

More information: "The Frankfurter Allgemeine Sonntagszeitung, citing a source on VW’s supervisory board, said the board had received an internal report at its meeting on Friday showing VW technicians had warned about illegal emissions practices in 2011".

Volkswagen Reportedly Warned Of Emissions Cheating Years Ago

To answer your question "Just how guilty is Volkswagen?" requires an answer that so far has been hinted at, but not publicly provided in detail, namely: did Volkswagen merely game the rules of the test, or did they actually commit the testing equivalent of perfidy, using openness about test details to defeat the test in detail. At issue is the hint given in the EPA memo that VW specifically programmed the dynamometer profiles of the US tests into their cars (which were provided to them by the EPA to help them prepare for the tests), i.e. taught their cars to recognize and distinguish the "30-block NYC driving test" from the more general condition of driving around in New York City, and to distinguish the EPA highway driving speed profile from generally driving around on the highway, etc. If VW went that far, they would have done something unique, never attempted by other companies that optimize performance for test conditions in ways that the EPA understands and (reluctantly) accepts.

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