While the clunker program has been hugely successful in the eyes of Obama administration officials, the auto industry, and the consumers who received transfers from the rest of us, there is serious doubt that the program is all that successful when final costs are counted. The doubt arises for at least three reasons. First, the program was supported politically primarily for its much touted environmental benefits. Carbon emissions would be reduced. But the reduction costs are at least ten times higher than alternate ways of removing carbon. Second, there is Bastiat’s parable of the broken window to consider. And third, there is a serious matter of eroding social norms for conserving wealth. A crushed clunker with a frozen engine is lost capital.Not to mention the knock-on effects of a smaller stock of used cars to filter down to liquidity constrained buyers, and the substitution effects of more reliable and less costly to operate cars on miles driven. (Via Cafe Hayek.)
The cash-for-clunkers program has kept my 'phone ringing with inquiries from the fourth estate. I'll link to any articles that follow.