David R. Henderson  

Cash for Clunkers in Action

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This video, and many like it, easily available on YouTube, would have Bastiat rolling over in his grave. As Bastiat put it, "destruction is not profitable" (1.18), at least not for society as a whole. The person in the video denounces it eloquently. Notice his understanding of opportunity cost at 0:16 to about 0.20. I would love to teach him economics. He already understands some basics at a gut level. Every one of his f-word usages is justified. I especially like his last statement.

H/T to Brad Smith.


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COMMENTS (8 to date)
eNRJ writes:

Terrible.

The only reason why the main stream media have called C4C "popular" is because of the immediate "stimulus" effect felt by people. But obviously the program is not an economic stimulus, yet it has been the only "stimulus" that people have directly observed since the passage of the stimulus package. This negative shock to the auto market and economy will be felt for some time.

The Cupboard Is Bare writes:

I watched quite a few of those videos. As someone who grew up around a gas station, I can certainly understand the upsetment of the mechanics who had to destroy perfectly good cars.

The level of waste is bizarre and totally disgusting. :\

What were they thinking? Who concocted this idea of CFC?

Floccina writes:

A shame but...
How did that Mazda qualify, is it not rated at better than 18mpg?

Douglass Holmes writes:

Yes, every use of the F-word was entirely justified. Billions added to our national debt to destroy good cars. As idiotic as the Republican congress was, the current congress is incredibly irresponsible.

Charley Hooper writes:

Cash for Clunkers was something I opposed intellectually until I saw a YouTube video of a 1989 Toyota Land Cruiser with 77k miles being destroyed with the death liquid. I had sold my 1987 Land Cruiser with over 340k miles on it and it was still running beautifully. The new owner drove it across the country and marveled that it used only 0.5 quarts of oil on the trip.

The '89 took 12 painful minutes to die, which the "announcer" said was his record. I felt like I was watching a loyal friend being tortured to death. Now I can oppose CFC intellectually and emotionally.

chipotle writes:

David Henderson,

Many thanks for posting this.

This is a great update of the "broken window fallacy" for modern times. Maybe there's a whole generation of "car guys" who's learning to have a deep skepticism of government schemes. We can only hope.

That video--with dialogue that couldn't be more perfect if it were scripted--is an instant classic.

Colin K writes:

If we're talking virtual tar and feathers, maybe we should start with Alan Blinder, who gets nearly everything wrong in this op-ed promoting the idea last summer:

http://www.nytimes.com/2008/07/27/business/27view.html?ex=1374811200&en=a19470300b516a2f&ei=5124&partner=permalink&exprod=permalink

I would love to see a 527 group run an ad scripted like this (numbers approximate):

- $4 billion in rebates to encourage people to buy new cars

- $40 billion in "loans" to GM and they still went bankrupt

- $400 billion in "stimulus" funds to create a few thousand government jobs

- $4 trillion in bank bailouts, and unemployment and mortgage foreclosures keep going up

- Jeff Immelt in a Fortune interview saying "Government's moved in next door and they're not leaving"--and he means it's a good thing:PRICELESS.
(http://money.cnn.com/2009/08/11/news/economy/new_rules_recovery.fortune/)

Superimpose this over the Youtube video linked here. Welcome to the Cash For Clunkers economy--vote your incumbent out in 2010.

aaron writes:

C4C Hurts Charities and Developing World, Increases Pollution, Wastes Energy and Resources


August 18th.
LUCAS DAVIS and Matthew Kahn suggest that you can't judge America's cash for clunkers policy without considering its international impacts—and its international impacts are troubling:

“Cash for clunkers” programmes can reduce carbon emissions both in the US and abroad, though at a high cost to consumers in developing countries. Because retirement rates are lower in low-income countries, imported vehicles may be driven for years while such vehicles would be scrapped under the cash for clunkers programme. This programme effectively raises the price of used vehicles in developing countries.

In addition to affecting greenhouse gas production, the “cash for clunkers” programme also affects average vehicle emissions in importing countries. If the exported vehicles are dirtier than the average vehicle registered in the exporting nation but they are cleaner than the average vehicle registered in the importing nation, then trade in used vehicles will reduce average vehicle emissions in both countries.

In our new paper...we document evidence of this trading pattern...Our NAFTA research has documented that the US is exporting relatively high-polluting vehicles to Mexico but that these vehicles are cleaner than the average vehicle currently registered in Mexico. This suggests that trade lowers the average vehicle emissions in both countries. Since Mexico’s total base of registered vehicles is much smaller than the US, the composition shift is much more quantitatively important for Mexico than it is for the US.


The authors note that the net effect of the policy on total greenhouse gas emissions depends on several behavioural responses; will developing nation residents respond to an increase in used car prices by driving older and dirtier cars longer, by not driving, or by purchasing a new vehicle? Will Americans respond to the programme by simply driving more? As an environmental policy, the effect of cash for clunkers is far from clear and may well be counterproductive.

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