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Feebates make efficient autos cheaper to buy and inefficient autos costlier.79 Buy a fuel hog and you’d pay an up-front fee, right on the price sticker, that climbs as its fuel economy declines. But choose a fuel sipper instead and you’d get a rebate funded by others’ fees: the more efficient the auto, the bigger the rebate.

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The US tire industry in the 1930s, TV manufacture in the 1960s, and autos in the 1970s all suffered the effects of decision processes that were unresponsive to change because of the range of obligations that went with quasi-monopoly. In all three cases, the attack came from the rise of cheaper sources of production in Asia.

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