Appliance Standards and the Welfare of Poor Families

Sutherland recently described U.S. federal appliance standards as causing a welfare loss that falls "particularly heavily on poor families." He attributed this loss to their risk aversion and to their being forced to invest at a discount rate of 7%. This note estimates the loss caused by this risk aversion at less than eight cents per year in the case of the 1993 refrigerator standard, and documents that standards have not been designed with the intention of forcing consumers to invest at a 7% discount rate.