Sticker Shock - it's more than just the price of the car

This morning's NYT editorial, "Sticker Shock," makes one great point, and I think misses another, with this central assertion:

Labels [in this case, about car mileage and emissions] can help consumers make better choices. But Detroit and other manufacturers make big changes only when regulators force them to.

The value of this insight is plain, and often denied by market fetishists. If we're going to have competition in a high-volume consumer setting, the least the consumer needs is good information about the products she is consuming. Can you assess the safety of the eggs you buy? Do you test the processor speed of a computer before purchasing it? I will make better (more market-oriented) consumer choices when I have useful information. How else can the invisible hand act but in the light?

That said, I think there's a bit missing to the editorial, and it's about how the market regulates itself. There's a kind of ecosystem for products that drives the producers to change, or not. That ecosystem contains market forces and government regulations. The market forces are undeniable. That's why the world buys so many Toyotas, despite recent problems (which have reduced Toyota sales).

But what I think is wrong with the statement I quoted, and with the general perception of market forces and manufacturing, is that producers in one regulatory setting react less well to the market forces than producers in another. That is, the reason American producers (as the editorial states) withhold information, and other consumer-centered improvements, is that the regulatory environment in the United States permits them to survive that way.

No longer forced to compete by hunting, the US car industry has become tame, living hand-fed in the shelter of regulatory neglect.

Companies that respond without that insulating blanket develop more fuel-efficient, lower-emission cars. They do this without the appearance of government regulation.

So the anti-regulatory crowd in the US has it exactly backwards. The denial of sensible regulatory pressure on auto (and other) producers IS the market distortion. Sensible regulations allow consumers and producers to act rationally in the marketplace.