At 02:57 PM 8/10/2009, Mark Cookson wrote: There are two effectively independent pieces to Cash-For-Clunkers..
1) Giving folks $4500 to buy new, more efficient car 2) Having the dealer to destroy old, less efficient cars. Regarding (1) a) The money comes from taxes. The government has created nothing -- it has only decided for us that $4500 we might have chosen to spend on education, food , health care, or even, perhaps, more fuel efficient new cars will be spent on more fuel efficient new cars. Auto workers end up with more of our money, teachers, farmers, and nurses with less. b) What happens when the artificial stimulus ends and all the people who would otherwise need new cars already have them? The immediate benefit of the program is apparent, but the inevitable consequence is just as apparent. Regarding (2) Needless destruction of wealth is always, always, always bad economics. In this case the reduction in serviceable used cars and used engines will drive up the price of those items. Hence this program raises cost for the most economically disadvantaged -- those who cannot afford new cars and new engines. How many large families (who need a big car) won't be able to afford it and so stay with their even more inefficient even older big car? M. _______________________________________________ Miatapower mailing list [email protected] http://list.miatapower.net/cgi-bin/mailman/listinfo/miatapower
