THE LIMITS OF IRRATIONALITY AS A RATIONALE FOR REGULATION

Recent years have seen a rapid growth in the number of federal regulations intended to reduce Americans’ consumption of oil, coal, electricity, or energy generally (U.S. Office of Management and Budget [OMB], 1997). These often take the form of standards that prescribe a minimum energy efficiency for commercial and household appliances and vehicles. In setting these standards, the responsible regulatory agencies (chiefly the DOE, the Department of Transportation [DOT], and the Environmental Protection Agency [EPA]) have advanced fantastic claims about the magnitude of private benefits these rules will yield.