Reverse causality

Just as the world seemed poised to combat global warming more aggressively, the economic slump and plunging prices of coal and oil are upending plans to wean businesses and consumers from fossil fuel.

From Italy to China, the threat to jobs, profits and government tax revenues posed by the financial crisis has cast doubt on commitments to cap emissions or phase out polluting factories.

Automakers, especially Detroit’s Big Three, face collapsing sales, threatening their plans to invest heavily in more fuel-efficient cars. And with gas prices now around $2 a gallon in the United States, struggling consumers may be less inclined than they once were to trade in their gas-guzzling models in any case.

Here is a quick comment on the first sentence of the third paragraph of the excerpt (Economic Slump May Limit Moves on Clean Energy): Isn't the causality wrong here? "Detroit's Big Three lack of planning to invest heavily in more fuel-efficient cars has led to collapsing sales."

Comments

[JDC]

The auto industry would say that their business is more demand driven and that their lack of planning to invest heavily in more fuel-efficient cars was due to the fact that folks wanted their SUVs. When I worked in Detroit, the attitude was less proactive and more reactive. Everything was set on car model years and not so much an over arching plan.

[Michael Griffiths]

I'm not sure it's fair to say that.

If anything, the combination of a recession - which reduces large capital expenditures by people, like cars - and the dramatically lower oil prices (due to a recession) would mean that if Detroit HAD spent billions building more fuel efficient cars, they would be WORSE off (more debt, etc) than they are now.

Also, Detroit's failure to invest in energy efficient cars led to dropping sales... as fuel prices rose. Now that they're much lower (though not as low as previously), you would expect to see increase purchases of fuel-inefficient cars.

Not to mention that the current crisis makes it more difficult for companies to justify non-critical expenditures, such as on green technology (short of the small number of things that will actually save money).

So I'm not sure your causality statement is fair...

[Patrick Bell]

I'm not sure that this is indeed such a clear cut case of reverse causality.

On the one hand, the Big Three have been slow to re-invent themselves, while foreign automakers like Toyota have been busy building on innovations.

On the other hand, producing "green cars" is not yet a profitable enterprise. It takes on the order of a decade, with only minor changes to a model, for it to become profitable in mass production.

And so far, none of the major automakers (whether foreign or domestic) have even come close to reaching that kind of diffusion. See e.g. "The Car of the Future, But At What Cost?"