Greenspan and CAFE
By David Henderson
The latest issue of The Freeman: Ideas on Liberty carries two articles written or co-authored by me.
The first, “Was Money Really Easy Under Greenspan?,” by Jeff Hummel and me, goes after the view that Greenspan conducted a loose monetary policy that was a major factor in the housing boom. Interestingly, almost everyone who claims Greenspan conducted a loose monetary policy makes that claim on the basis of low interest rates. As we point out, interest rates can be low due to real factors as well as monetary policy. The specific real factor we point to is the flow of savings from Asia and elsewhere. Greenspan also pointed to this factor earlier this week, as did Financial Times writer Martin Wolf in his latest book, Fixing Global Finance.
My other article is “Unintended Consequences in Energy Policy.” In that article I point out that one unintended consequences of Corporate Average Fuel Economy (CAFE) laws has been thousands of extra highway deaths, that the CAFE laws themselves were a consequence of Nixon’s and Ford’s price controls on oil and gasoline, and that even OPEC’s formation was an unintended consequence of President Eisenhower’s discriminatory scheme of import quotas on oil.