The Wall Street Journal‘s editors typically understand a clunker of an idea when they see one. Here’s the closing paragraphs from their editorial today on Cash for Clunkers:
The basic fallacy of cash for clunkers is that you can somehow create wealth by destroying existing assets that are still productive, in this case cars that still work. Under the program, auto dealers were required to destroy the car engines of trade-ins with a sodium silicate solution, then smash them and send them to the junk yard. As the journalist Henry Hazlitt wrote in his classic, “Economics in One Lesson,” you can’t raise living standards by breaking windows so some people can get jobs repairing them.
In the category of all-time dumb ideas, cash for clunkers rivals the New Deal brainstorm to slaughter pigs to raise pork prices. The people who really belong in the junk yard are the wizards in Washington who peddled this economic malarkey.
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Amen
And it’s considered a success story! Does the stupidity have no bounds???!?!??
Just read below, and you’ll read serious defenses of the idea that it just might be a good idea to bribe people to destroy their cars just so Detroit can stay busy. It’s truly scary to think that there are people who can’t instantly see through this.
Never underestimate cognitive dissonance.
Never underestimate the power of stupid people in large groups!
Don didn’t get the name of the program correctly. It was called “The Wildy Popular Cash for Clunkers Program.” At least that’s what I read in the newspapers over and over again.
Tongue in cheek of course.
Don’t take this as a defence of C4C, but the “Economics in One Lesson” only works if, in fact, they are productive assets. If the cars that are being disposed of have a total cost more (depreciation, safety, maintenance, operating costs (gas, insurance, etc) than the ones they are being replaced with the program may have merit. How many people commenting on what a dumb idea it is are using a computer that’s more than 3 or 4 years old? The computers they were using 5 or 7 years ago are more than adequate for the job of commenting on a web site.
That and the fact that the claim was that it would increase production – not wealth. Poor Bastiat. So misused and abused.
Oh please. Show us where the official proponents were careful to make it clear to everyone that they were merely trying to stimulate production and that no increase of wealth would result. I’d love to see a quote from Robert Gibbs along the lines of “Um, people, rember that we’re only trying to stimulate production, and please keep in mind there will be no increase in wealth.” What are you smoking?
All they talk about is what’s going on with GDP and jobs. When was the last time you heard them report on the total wealth of the U.S.?
Don’t forget I was opposed to this program from the start, Mark. I’m just saying that this entire stimulus debate has revolved around GDP and underutilized resources. Bastiat is great, but largely irrelevant to the kinds of things most people have been talking about.
Nice dodge.
The thread was getting strangled, so this is an attempted restart.
And I repost for legibility:
No evidence has been presented that persuades all climatologists that CO2 forcing is significant.
by suggesting a modest carbon tax with a rebate that makes it neutral with respect to the total tax burden,
Unfortunately, your proposal is not under consideration. I might vote for you if you ran for office due to your reasonableness, but until then, I don’t expect a reasonable response from congress. I don’t even expect a reasonably coherent response from congress.
No bill that can be expected to pass ever does so without a good deal of pork, and as I think spending is of greater import than taxes, then I don’t expect much good of cobbled bills.
I hope to God that’s not what you’re waiting on.
I’ve made my assessment of the arguments and my judgment is that the critiques that various scientists have made of the AGW hypothesis are valid.
1. most recent ice core data shows geohistorical evidence that CO2 increase LAG climate warming by about 800 years.
2. increasing CO2 levels have diminishing impact on thermal radiation.
3. the “hot spot” predicted by AGW theory has not appeared in the data.
4. the models completely failed to project the last decade trend. I emphasize the word “completely”. This does not encourage faith in the models.
Here, read this paper.
There is plenty more from different sources, including very notable climate researchers.
Taking a cue from Sam (thanks), I’m moving a skinny thread back out for clarity.
Daniel, you partially quoted me and responded, “You’re seriously telling me with a straight face that this is the statement of an objective observer that recognizes that the world is complicated, that he doesn’t know everything, that he cannot predict the future, and that things aren’t black and white?”
Does your brain just ignore the parts of statements that don’t work for you?
My complete statement was: “Once the government imposes itself, they will not proceed modestly. They will proceed politically, with all the badness that entails. That’s the inevitable result of what you support, therefore it is what you support.”
I have yet to observe a political process behave any other way than politically (it’s kinda definitional, duh). Evidently, however, you disagree with that statement. Are you really so naive to think government will proceed in some way other than political? Do you really believe that politics leads to modest and prudent action (excepting the rare dumb luck occasion)?
Reality is a pesky thing; you can delude yourself into thinking you’re all moderate, thoughtful and considered (hell, you may even be all those things) but it’s a safe bet Congress won’t be.
RE: “Does your brain just ignore the parts of statements that don’t work for you?”
Since “politically” is not the opposite of “modestly” those two sentences seemed like independent thoughts. I didn’t quote the second one because as you say – you can’t really argue with it. They do it politically sort of by definition.
Re: “Evidently, however, you disagree with that statement. Are you really so naive to think government will proceed in some way other than political? ”
Is this really what you’re arguing about now? No, I agree completely that everything they do is political. I disagree that nothing they do is modest or cautious.
Happy now?
It seems that you still don’t get my criticism – no doubt my clumsy writing is at least partly why.
Politics is a corrupt and corrupting process. If you realize everything government does is political and continue to support government intervention then you have much more faith in the political process than is justified by experience. IMO that is either foolish or naive (or worse). That is a root cause of much of my criticism, and you seem completely blind to it.
Like many other analysts, many of your ideas might be fine if only reality was different; they may seem prudent in some hypothetical abstract scenario, but they’re either incompatible with reality or incompatible with freedom (or both). When government embarks on some intervention, they will not stay on the moderate course you write about. Government will overstep its bounds because of the way politics works. When (not if) that happens it is very difficult, if not impossible, to stop them. It’s like a ratchet where we’re the ones getting screwed. I’m in the crowd trying to reach the switch to make the ratchet go the other way; you’re in the crowd making that harder to do (or maybe even helping turn the ratchet).
That is the realization I hope you have someday. If I can help you get there with my crappy writing skills I’ll have done my good deed for the day. (Of course, it’s also possible you do understand all this and you just don’t value freedom. Or you may just believe freedom is not threatened by government, but I don’t think you’re that stupid.)
The big tip-off that those cars still had value; you had to pay people to get rid of them. Also, physically destroying the engines. If the cars had no value to anyone, then why go to such extremes (how much energy was expended in the trashing process?) to destroy something that “no one values”.
SteveO,
You’ve perhaps missed my point. Lots of things have “value” but it still makes sense to dispose of them and replace them with something that has either a lower cost or higher productivity. Boeing 707′s and 727′s still have “value” but that hasn’t prevented most airlines from replacing them with 737′s and 747′s, etc.
Why would they dispose of things with value? They are sold, and the capital is put towards the next purchase.
NathanS,
One would dispose of things with value for one or more several reasons. Your disposal costs are higher than the value you receive, the opportunity cost of selling the asset suggests your time would be better spent on another activity, the liability attached to selling an asset to another user leads you to prefer disposal rather than sale, you want to avoid competing with someone who has a different cost structure and could make your asset economic even if you can’t, geography or regulation means that an asset has value in another location but not where it’s located, etc, etc.
Again, for reasons of clarity, I’m not arguing that any of these conditions apply to the C4C program, but I am arguing that they may apply to the retirement and disposal of capital assets. I haven’t seen any argument of critics that they don’t apply (other than unsupported statements of “they don’t apply”) , nor have I seen any evidence that suggests they could be used to support C4C. My point is that the WSJ article, and the comments about it, have added absolutely nothing to the discussion.
Exactly. Rotor’s blind to the fact that the typical C4C car was valuable enough for the owner to keep until Obama printed up some money to bribe them to bring it in.
If, indeed, it would have been a significant cost savings to retire the older vehicles, then you would have a point.
Hoewever — we were at no such point.
Look at the additional cost of a hybrid vehicle, and compare it to the amount of gas/energy/fuel cost saved. It takes years to recoup and break even on that investment.
I seriously doubt the C4C program was offering a better fuel-economy boost than switching to a hybrid would have.
The other issue I have with the analysis cited in the WSJ is the failure to recognize what destroying those cars did to the used car market. It temporarily disrupted the supply of serviceable vehicles, thereby adding an additional cost to those who are even poorer.
Not to mention that the “clunker” that only got 14 mpg would have been a significant upgrade for the person with a 9 mpg oil-burner.
Ike,
I think the question is whether your statement “we were at no such point” is valid or not. I’m not arguing that C4C was a program that could be economically justified, but I am arguing that a simplistic position (not yours, the one that is represented in the WSJ article) that “these cars had value and therefore junking them makes no sense” is more than silly, it’s wrong. Lots of capital assets get retired and replaced with newer more efficient assets. I’d like to read an informed criticism of the program and not a simplistic “it was invented in Washington so it must be a junk yard idea”.
Oh, I agree it was too simplistic a notion.
I merely offer there was WAY too much spent in nudging people to exchange for a resource that was only marginally better (and again, with no analysis about the effects on the used-car market.)
Ike,
That would be something I’d like to read; what’s the justification or the evidence that way too much was spent? I appreciate that “it feels like a waste of money” but that’s an emotion. Have you seen any actual data presented?
“these cars had value and therefore junking them makes no sense” — of course this is true. The people who were actually destroying the cars – the dealers – were not voluntarily retiring capital assets. They were forced to destroy the cars by the puppet masters in Washington. They’ve apparently been able to fool you into thinking that the transaction was voluntary from start to finish, because here you are defending it.
Mark,
I’ve written three or four times I’m not defending or even supporting the C4C program. I’m arguing that the basis of the criticism in the WSJ is silly.
I’ve gone even further and stated I’d like to read a valid criticism of the program, one based on a reasonable understanding of economics, not one based on slogans such as “puppet masters in Washington”.
I’m not American, and perhaps that is why it’s more difficult for me to understand why it is so hard to have reasonable discussion without the presumption that one has to be partisan and political.
Lots of capital assets get retired and replaced with newer more efficient assets.
Yes, when owners (or their agents) determine that is the more profitable thing to do. How can the federal government determine this in each instance?
Your federal government isn’t an agent of the people?
Productivity is subjective. One of the first assertions Mises makes in Human Action. All action is productive in providing some aim.
I have a backyard in need to dirt disposal…Dan can fill them back in with different dirt.
“The people who really belong in the junk yard are the wizards in Washington who peddled this economic malarkey.”
That seems to be a bit harsh on Washington’s basketball team to be associated with such scoundrels.
I think that’s the wrong criticism, though. It’s another misapplication of Bastiat. C4C is a dumb idea because all evidence suggests it just shifts purchases by a couple months. What good does that do?
It’s very funny, when first hearing about Cash for clunkers, I thought of Economics in One Lesson. I guess I am learning something reading all those books.
The wizards in Washington are there, because the voters sent them there. Thus they are not the problem, but only a symptom.
The real problem is the system that allows these morons to decide anything. Democracy is the problem.
Hold on a second. We can’t get richer by destroying stuff? But I thought war was good for the economy?
Ecommunist,Can you find one post or comment on this blog that’s ever said “War is good for the economy?” I’ve never seen one.Danielkuehn and DavidRotor,It’s irrelevant to talk about “a more fuel efficient fleet, which nobody seems to be talking about”, when you’re using the word “fleet” to mean every car in the United States. Who exactly benefits from a higher average fuel efficiency among 250 million vehicles, if not the individual owner of the new, fuel efficient car who now faces a decreased cost per mile to drive? And how does that possibly justify public subsidies for that individual to purchase a more fuel-efficient car, or to destroy the powertrain of their less efficient vehicle?Also, it WOULD be incorrect to bring up the Bastiat analogy if C4C merely subsidized the purchase of new cars. However, the mandated destruction of the traded-in vehicle’s powertrain is certainly the best implementation of the broken window fallacy in practice that I’ve ever seen.
RE: “Who exactly benefits from a higher average fuel efficiency among 250 million vehicles, if not the individual owner of the new, fuel efficient car who now faces a decreased cost per mile to drive?”
Ummmm… every human being on the planet. It’s a crappy, ham-fisted attempt at solving a serious externality problem. But it’s at least a minor, likely marginal benefit of the program.
Re: “And how does that possibly justify public subsidies for that individual to purchase a more fuel-efficient car, or to destroy the powertrain of their less efficient vehicle?”
It doesn’t – refer to my posts, I’ve never supported C4C.
Re: “Also, it WOULD be incorrect to bring up the Bastiat analogy if C4C merely subsidized the purchase of new cars. However, the mandated destruction of the traded-in vehicle’s powertrain is certainly the best implementation of the broken window fallacy in practice that I’ve ever seen.”
Even with the destruction, which I was wrong about, it’s bad Bastiat. Nobody made the argument it was supposed to increase total wealth. On the economic front there are only two things the administration cares about right now: GDP and unemployment. And since GDP is showing some signs of life, it’s really just unemployment. C4C, misguided as it was, was all about production, not the total stock of wealth. It has nothing to do with Bastiat.
“Nobody made the argument it was supposed to increase total wealth.”
You can’t come up with quotes but want us to believe that the administration was careful to make it absolutely clear to everyone that transforming raw materials into cars would increase GDP but not effect total wealth. Surely Gibbs or Krugman or one of those guys spoke or wrote about it. I’d love to see it: “Well, this is just a transfer program, but at least Detroit will make a few more cars for a couple months.” Your grasp on the details of the program was weak, so maybe you’re misremembering other things, too.
It’s true I can’t account for everybody that ever advocated this. But can you name anyone who has been concerned about total wealth lately? It’s all about production and employment of idle resources. The original proponent of the idea certainly focused on production: http://www.nytimes.com/2008/07/27/business/27view.html
And it’s true, I don’t know the program in detail – but one other thing I didn’t know was the estimated improvement in emissions. According to this article it is 10 to 30 times better, which I honestly found very surprising.
Bastiat never quibbled with the idea that the glazier would get work. He just raised concerns about destroying a perfectly good window.
DK: “Bastiat never quibbled with the idea that the glazier would get work. He just raised concerns about destroying a perfectly good window.”
And other commenters here, as well as myself, are raising concerns about destroying perfectly good cars.
You’re trying to evade the Bastiat analogy by arguing in essence that the broken window was no good anyway because it conducted more than 1 BTU/year into or out of the house and couldn’t stop a .50 caliber armor-piercing incendiary round from penetrating it.
For most of the people, and the cars in question it’s completely irrelevant.
The fact that the politicians trying to justify the program refer to certain cars using the scientific term “clunkers” tells you absolutely nothing about the cars themselves, and the fact that these vehicles weren’t about to be scrapped until the respective governments paid for them suggests that they were worth more as complete, operable vehicles than as recyclable material.
Leaving aside the argument about carbon dioxide as a pollutant and an externality (and there’s plenty of debate there), the fact that an individual car or truck is over X years old (X=15 in Blinder’s definition of “clunker”) or gets less than Y miles per gallon reveals nothing about how much CO, oxides of nitrogen, unburnt hydrocarbons, and sulfur dioxide is emitted from that INDIVIDUAL vehicle.
There were undoubtedly plenty of low-mileage* cars with minimal carbon buildup in the engine or wear on the piston rings, and fully functioning emissions control systems – in other words almost non-polluting – that were destroyed by the C4C program.
*by that I mean total miles driven by the vehicle
It’s not that you can’t account for anybody, you can’t find anybody. Even the article you cited talked about three hoped-for results from the program. One was improving the environment, the other was income redistribution, and the last was stimulating the economy.
“Cash for Clunkers would stimulate the demand for new cars as people trade up. It need hardly be pointed out that our ailing auto industry, like our ailing economy, could use a shot in the arm right now.”
Of course he’s talking about (fantasizing about) the government stimulus creating more wealth.
And this is worth a second reply, since I looked into the Texas “Cash-for-Clunkers” program that Alan Blinder (and Daniel Kuehn) cite in the above NYT link. Irony abounds, because Texas came close to a program that might actually achieve the goals Blinder mentions without needless destruction of capital, unlike the federal C4C program.Specifically, Texas’s program, officially called the “low income vehicle repair assistance, retrofit, and accelerated vehicle retirement program (LIRAP)” has the following traits:1. Means testing (individuals over 300% of the federal poverty line ineligible). 2. Repairs, as well as replacement vehicles, are eligible for state subsidy.3. The program is restricted to the counties in the state which have implemented an inspection/maintenance program.* This requires, among other things, that the vehicle’s emissions are measured annually. Also, these counties are located in the areas with the greatest air quality problems.4. The Texas program limits the replacement vehicle’s price to $25,000, and also applies to cars up to 3 model years old and trucks up to 2 model years old.*In practice currently, this is limited to the metro areas of Houston-Galveston-Brazoria, Dallas-Fort Worth, and El Paso.If anyone wants to check – here’s the Texas LIRAP home page.
A summary of the program and rules adopted by the Texas Commission on Environmental Quality to administer it.
The actual text of the Texas Senate bill adopted in 2007.
$3 billion buys you a lot of trees. That’s a far better net carbon sink than increasing the gas mileage of a small number of vehicles by a small amount.
$3 billion also buys you a lot of CO2 scrubbers, and can replace many coal power plants with more efficient alternatives.
Or $3 billion could have been kept in people’s pockets so they can dispersely invest it in more efficient technologies or processes or capital.
C4C fails on every single one of its stated goals.
I couldn’t agree more (well… I’m not personally aware of whether it’s a better net carbon sink or not, but the point is it’s a good one – of course, where do you think you’re going to find the land to plant those trees without destroying some existing capital? Either way… that is a tangent).
As I said, I couldn’t agree more. I really feel like you’re not getting the fact that I don’t like C4C. I don’t support it. I never have. I’m just (1.) trying to find some gross positive effect where I can so I can feel better about it, and (2.) trying to keep Bastiat from being poorly applied. But I don’t like C4C. I don’t think you have to despise every facet of a program to be genuinely against it (just like I don’t think you have to support every single facet of a program to get behind it).
The cash giveaway turned out to be even more popular than we imagined! What a great success! Now if can just apply that business acumen to GM and AIG…
I used my GMU education to write this: http://edradio.wordpress.com/2009/10/06/cash-for-clues-econ-101-says-clunkers-made-you-poorer/
So to simplify you could simply ask why people would ever replace windows? Obviously they do, and obviously its a valid economic choice in some circumstances, but forcing them to do before it is profitable is obviously inefficient.
Isn’t it a reasonable understanding of economics that would lead one to think that it’s foolish to take money from one citizen in order to bribe another citizen – in conjunction with a local business – to destroy a capital asset?
I’d assert the one with an unreasonable understanding of economics is you. You apparently accept the basic premise of C4C that it makes sense to bribe people to arbitrarily DESTROY assets. So, I’m not accusing you of being partisan, but merely being misled by them. As an American, I care about ideas — the whole premise of the American experiment is meritocracy of thought or action, so don’t bother bringing up nationality.
No, I haven’t.
And neither has anyone else.
It would help if the initiators of the program had bothered to tell us what metric they would use for success.
It’s clear that their measure of success was NOT based on the number of vehicles that were involved in the exchange. My proof is as follows:
Let’s say, for the sake of round numbers, that the goal was to move 250,000 vehicles. With a billion-dollar budget, that works out to an average of $4,000 per car.
By C4C’s own admission, they were “shocked” that the program blew through the billion dollars in a mere four days – thus the decision to extend the program.
Now, had “number of vehicles moved” been established as a standard for success, then this would have been a dire admission of failure. What that indicates is they could have moved the same number of cars at a more affordable incentive – say $1500 up to $2000.
Instead, they tripled the budget.
What this indicates to me is that the “key metric for success” cannot logically be the number of cars sold – nor any number which is contingent upon that number as a factor.
The environmental benefits – whatever they might be – are still based on a per-vehicle basis. And if the government “spent” (taxed/borrowed) too much money by a factor of three in order to spur that activity, then we’re talking real failure here.
Short answer: I have no data other than what the government provides — but the government’s own activity in this case is proof they aren’t even considering the data. Their “success” cannot be a numerical one, so it must instead be political.
What data are you talking about? What metric would prove that forcing citizen group A to help buy cars for citizen group B was a success?
Nathan,
You make the point quite well, the “Economics in One Lesson” simply doesn’t explain why someone would ever replace the window.
Whether C4C was a valid economic choice for the American economy is question. Simplifying it to sloganeering or personal insults, doesn’t answer the question. My “gut” feel is that it was too gross a tool to have been efficient, but I have no data to support that gut feel. In making a decision to retire and replace a capital asset I am used to at least approaching an informed decision of the trade-off between keeping an asset in service and replacing it. In this discussion I’ve only seen opinion, and partisan viewpoints, without any actual data in support or against the program.
And immoral.
My question is, what is it we are supposedly producing, if not wealth?
We are producing wealth.
That’s an interesting suggestion, if they could have moved the same number of cars at a materially lower cost, that would be pretty strong evidence that my gut feel that it was too gross a tool, and not one based on a reasonable decision to retire uneconomic assets, would be correct. Of course, that still doesn’t answer the broader question of whether it was right for the American economy, but it would be a pretty strong indictment of the idea that it was based on the assets efficiency.
So you never want to see a road or highway in your area resurfaced or a bridge re-decked? That, after all, is merely DESTROYING assets and taking money from one citizen to bribe others (with a road that doesn’t have pot holes, and a bridge that doesn’t occasionally drop bits of concrete onto the roadway below) in conjunction with a local business.
I don’t disagree that I have an incomplete understanding of economics, but I’m not seeing anything in your arguments that are furthering my understanding either.
You’re comparing maintenance – resurfacing – with destroying a car? Nice.
If that is too hard for you to understand, then simply substitute re-surfacing a road with DESTROYING an overpass and building a new one.
You do realize cash for clunkers doesn’t involve any destruction of any cars, don’t you?
They just get resold as used cars, and presumably depress prices in the used car market. I’m not sure about this whole “wealth is being destroyed” thing.
I do think it would be pretty stupid to destroy a working overpass and build another one, yes.
They destroy the engine and can scrap the rest of the car in 180 days –any parts which don’t get sold in this time must be destroyed. These manipulative schemes (um, programs) are complicated!
Just found this note, too: “the original cash-for-clunkers plan — the formal name is the Car Allowance Rebates System (CARS) — called for the obliteration of both.” Our wise leaders originally wanted 100% obliteration.
danielkuehn, you are incorrect in your understanding of the program.
The engines must be destroyed. The vehicles are sent to scrap yards. The scrap yards must not sell any powertrain components from the vehicles. The scrap yards only have a maximum 180 days to sell any non-powertrain component, before crushing or shredding what remains.
That’s wealth being destroyed, on your dime (and mine).
No, they don’t. They are mandated to be destroyed, as somebody pointed out upthread.
Really? I thought they had to be destroyed as well?
Under the program, auto dealers were required to destroy the car engines of trade-ins with a sodium silicate solution, then smash them and send them to the junk yard.
So what do they do with cars with destroyed engines?
Ok then. I’d suggest that you spend some time thinking through situations where it would be pretty smart to replace a working overpass and build another one. When you do that, you’ll begin to appreciate that there are times when disposing of an asset makes economic sense. Here are a couple of lines of inquiry for you to consider. Does the working overpass have limited capacity, and does that capacity limitation mean that thousands of commuters burn gas (and waste money) in lengthy traffic jams trying to cross the overpass? Or, perhaps, the working overpass was built to a different weight capacity, which means that certain freight traffic needs to avoid crossing the overpass and has to use a longer route. If you put your mind to it I’m sure you can come up with any number of scenarios where DESTROYING an asset leaves you feeling all happy and upbeat about all the value you just created!
This is really interesting – apparently I’m very wrong. When it was first implemented, I heard a lot about how it would flood the market for used cars as another argument against it. It seemed so reasonable (why just destroy a car???) that I figured that’s what they did.Great – thanks for the info. One more reason not to like it. I still don’t think Bastiat exactly applies because the goal has always been to increase demand production (not to mention get a more fuel efficient fleet, which nobody seems to be talking about), but obviously wealth is destroyed and that’s no good.I’m going to read up a little more on this – thanks guys.
RE: “not to mention get a more fuel efficient fleet, which nobody seems to be talking about”
Except for the excellent points made by David Rotor. I shouldn’t say “nobody”.
We are producing wealth.
So what is it you are attempting to claim by bringing up the fact that those who pushed the C4C program only referred to increasing production, not of increasing wealth?
Are you saying that they only made the claim of “increased production” and not “increased wealth” because they knew (or feared) that the wealth destroyed by the program would exceed the extra wealth produced — and they wanted to leave themselves a way to weasel out of that criticism by being able to say they never promised a net increase in wealth?
Yes, yes, David, we get it already. What you don’t seem to get is that when it “makes sense” to destroy a privately owned asset, you don’t have to pay people to do it. If the benefit of junking the old asset is real, then they will do it themselves. The other thing you don’t get is that in all of your examples one of two conditions obtain: either the old asset occupied a fixed location that needed to be cleared for the replacement (roads, overpasses, buildings), or the old asset had depreciated to the point where nobody wanted it at any price (old computers). Neither of these is true of the CARS program. You can sell a car without destroying it, and most of the cars junked in this program would have had some resale value.
The only reason to require dealers to junk these cars was to dress up this government giveaway in faux-environmentalist garb. Otherwise valuable vehicles were destroyed for no good reason, and people were encouraged to take on consumer debt that in many cases they could ill-afford to boot. The program was a charlie-foxtrot from start to finish, no matter how many hypotheticals about congested overpasses you invent to show how it could have made sense, if not for the fact that it didn’t
Nice try, but your economic reasoning is fatally flawed. In the case of the overpass, aside from adding lanes to the one you already have (which would not be destructive), the ONLY WAY to get a better one is to destroy the old one and put up the new one. The old one MUST be destroyed in order to make way for the new one. That’s why you’re happy to destroy it. But trading in an old but functional car (and the trade-ins all had to be functional) does not require the destruction of the old car in order for you to get your new one. Destroying the functional clunker was an arbitrary rule written by the autocratic social engineers.
So your overpass analogy fails and you still have yet to deal with the moral issue of paying for citizen A’s clunker with citizen B and C and D’s money.
I think the point was that people felt that on net under the conditions of a depressed economy wealth WOULDN’T decrease. But that’s a whole other issue. People can fight about whether that’s true or not (and my suspicion is it’s not true with respect to C4C).
My only point was that the goal has always very clearly been to get the big three producing new cars. The goal has never had anything to do with the total wealth of society. And I think everybody – no matter what they think it does to total wealth – can agree that it increases the production of new wealth. In that sense it achieved it’s goal. It’s still bad policy.
My only point was that the goal has always very clearly been to get the big three producing new cars. The goal has never had anything to do with the total wealth of society.
Here is a quote from a fact sheet on the governmen’s CARS website:
The program is designed to energize the economy, boost auto sales and put safer, cleaner and more fuel-efficient vehicles on the nation’s roadways. (bold added)
The government is very clearly claiming that the C4C program will “energize the economy” in addition to increasing auto sales. So they are indeed very much guilty of the broken window fallacy.
rpl,
I’d be shocked if most of the people here don’t get the idea that replacing an asset, even a valuable asset, with another asset can make economic sense. But, the discussion threads on here clearly indicate that many do not.
Your statements that my examples are worthless are no more supported than I saying the old computers in my example certainly do have value, but people still choose to replace them or for me to change my analogy of a new overpass with both destroying the old and building the new one in a new location. It’s merely a statement and has no other value.
The question remains the one I started with, and the one you raise, was the value created, if any, (improved fuel efficiency within the whole fleet, improved safety standards of vehicles on the road, lower maintenance costs (if true), etc) was worth the cost of the program. Ike makes the best case I’ve read, all the value created, if any, may have been available at a substantially lower cost. That question is not answered by window replacement silliness in the WSJ article.
Foiled again.
simply doesn’t explain why someone would ever replace the window
Because it’s broken?
Sometimes to increase the R value.
I think you’re reading way too much into a gimicky political catch phrase.
Better to look at Alan Blinder’s original proposal. I have no idea what “energizing the economy” means, and I don’t think they or you do either.
And it’s worth pointing out that as long as there are negative externalities associated with carbon production, the net effect on total wealth is ambiguous – if you want to be technical about it.
Oh, please, David. I told you exactly why I thought your examples were inapposite; to wit, because they differed from the CARS program in the key respects that I cited. Disagree if you like, but don’t pretend that I “didn’t support” my claim.
As for why the computers in your hypo were worthless, a thing is worth only what you can use it for or sell it for. If you can neither use it or sell it, then it is worthless. If you’re going to pettifog over what “worthless” means, at least have the decency to observe that it’s possible that you could sell the old computer, but that the price it would fetch would be too low to justify the effort. It wouldn’t strengthen your argument any, but it would at least make sense. (I guess the one good thing we can take away from this discussion is that if they’re not teaching economics in school these days, at least they’re not teaching rhetoric either.)
Finally, there is no need to debate the “value created” by the CARS program because CARS was strictly a transfer payment. Transfers by definition cannot create value; at best they are neutral. Add in the fact that a working automobile (i.e., an asset that would have had value to someone) had to be destroyed as a condition of receiving the transfer payment, and one has to conclude that the program was a net loser.
Yeah, the ‘value created’ thing was ridiculous. The funny thing is that he clearly fancies himself quite the intellect. Typical policy wonk autocrat.
Well speaking of rhetoric, that was a nice example of same. You’ve done a nice job of changing my discussion into support for a program you disagree with, you’ve put labels on an argument and then defined those labels using self-referencing expressions, and wrapped it up in a bow that claims the program is a net loser – and yet – other than by being self-satisfied that anything done is Washington is wrong, you’ve not furthered the argument one bit. Again, it’s not that hard. Ike was able to throw the whole thing into question with a simple reference to supply and demand.
It’s only saving CO2 if you drive a lot.
http://www.slate.com/id/2224306/
Turns out the new vehicles purchased weren’t even that good.
http://www.autoobserver.com/2009/08/cash-for-clunkers-drives-consumers-to-fuel-efficient-choices-edmundscom-reports.html
If only we could harvest the energy of Bastiat rolling in his grave, Global Warming would be a solved problem.
And it’s worth pointing out that as long as there are negative externalities associated with carbon production,
Which are? (data requested)
I think you’re reading way too much into a gimicky political catch phrase.
The words are what they are — “energize the economy” cannot by any possible stretch of the imagination be construed to mean “not necessarily having any positive effect on the production of wealth” .
The notion that the administration didn’t intend for the people to think that this program would stimulate the economy is laughable. It simply illustrates just how silly a position you are willing to take in your endless efforts to apologize for all things Obama.
Re: “And other commenters here, as well as myself, are raising concerns about destroying perfectly good cars.”
Right, me too. I’m not supporting this program, Christopher. I’ve opposed it every time it came up on Cafe Hayek. I’m not trying to “avoid the Bastiat analogy” as you say, I’m trying to point out that it’s irrelevant. Bastiat was concerned with total wealth. The concern right now is ramping up production – the creation of new wealth. I’m tired of arguing this point – the modern usage of Bastiat is consistently sloppy and haphazard. People scratch their heads or deny the data when “economic miracles” occur after wars because they don’t understand what Bastiat was really saying – and the fact that he was writing before we really differentiated much between stocks and flows of wealth. You don’t break a window just to put people to work – it’s a dumb, impoverishing, self-defeating move. But it WILL put people to work. Bastiat never denied that.
Anyway, I don’t support C4C, I never have – and everything I learn about it on here makes me support it less. All I was saying was that the pollution abatement is at least a silver lining to a very dark cloud, despite the fact that a lot of people on here don’t accept that silver lining.
RE: “Of course he’s talking about (fantasizing about) the government stimulus creating more wealth.”
YES – it creates more wealth!!! That’s what I’m saying is the whole point. It destroys wealth too. The question is what is the net change in wealth? I suspect it’s not positive. But gross wealth creation puts people to work regardless of what net wealth creation is doing.
As I posted above, the CARS government website clearly states that the purpose of the program was both to increase car sales (“boost production”) and “energize the economy”. That’s an exact quote.
What DK wants us to believe is that the term “energize the economy” actually means “not necessarily having a positive effect on the creation of wealth” — which is a preposterous interpretation.
The C4C program, with its built-in destruction of otherwise perfectly good cars to “create employment for the autoworkers” — which will supposedly lead to a “priming of the pump” — is clearly an example of Hazlitt’s broken window fallacy.
The absence of proof is not the proof of absence. By definition externalities are costs and benefits that aren’t internalized into the price. Without resort to price data, how would you expect there to be solid data on it? Does that say anything at all about it’s existence? Sub-Saharan Africa is probably short of a lot of public health data. Does that mean that everybody is fit and healthy there?
I’m not sure why you always ask this question (along with your perennial “but don’t you realize the government can mess up”) as if it proves a point. It doesn’t, Sam.
Sam,
That’s my point in a nut shell, and my questin about C4C. Were the cars replaced somehow “broken” or was there some equivalent of an increase in “R value”? It’s been hard for some people to understand I’m asking a question vs supporting a political position they oppose.
Mark,
You know nothing about me. Let’s not start exchanging comments at the level of “Mark’s a doofish and his breath stinks too!”.
Ah, I see the problem now. I assumed that you had a point and were trying to argue it, but apparently you just like to hear yourself talk. In the future, you should try to work the phrase “I’m just sayin’” into your post so that everyone will know that what you’re posting isn’t meant to be taken seriously.
My point, in case anyone still cares, is that the CARS program was incredibly wasteful, inasmuch as it induced people to destroy assets (i.e., cars) that they otherwise would have sold to someone who could get some use out of them. The program also induced people to make purchases (and take on debt) that they wouldn’t have made on their own, which is another form of waste. The GDP boost induced by the program is largely offset by the spending reductions that households with new car payments will have to make. The environmental benefits are tiny when you consider that manufacturing new cars has an energy cost and even clunkier clunkers are still on the road because people who would have bought the trade-in cars now can’t do so. Have I missed anything?
Notice that I haven’t said anything about “anything done in Washington.” I criticized this one particular program, and I have been (and remain) mute in this discussion about any other government programs. That you would in the space of an hour invent and attribute to me an opinion I never expressed and say to another poster, “Mark, You know nothing about me,” when he did the same to you is just too rich.
RE: “The words are what they are — “energize the economy” cannot by any possible stretch of the imagination be construed to mean “not necessarily having any positive effect on the production of wealth”.”
But I’m saying that they ARE saying it has a positive effect on the production of wealth. That’s what I’ve been saying all along. Just like Bastiat admited that the glazier produced more wealth. I just think “energizing the economy” is so vague and meaningless we can’t get anything out of that specific phrase – ie, we can’t determine that it means “a net increase in wealth”, which Bastiat demonstrates that we can’t expect from the destruction of wealth.
Re: “The notion that the administration didn’t intend for the people to think that this program would stimulate the economy is laughable.”
I agree. They did intend for people to think that this program would stimulate the economy. They did not seem to show any intention of promoting the idea that it would create wealth on net – only that it would spur a gross production of wealth.
RE: “It simply illustrates just how silly a position you are willing to take in your endless efforts to apologize for all things Obama.”
You clearly don’t understand what I’m saying – you thought I was suggesting they didn’t intend for people to think that it would stimulate the economy, when I’ve said repeatedly that’s exactly what their goal was.
And how am I apologizing for Obama when I’m arguing he was wrong to institute C4C??????
I swear – if I’m not adamently opposed to every single minute facet of a policy you guys think I support it! I don’t!
RE: “What DK wants us to believe is that the term “energize the economy” actually means “not necessarily having a positive effect on the creation of wealth” — which is a preposterous interpretation.”
No, I’ve never said that. All I’m saying is that they are promoting the idea that it will result in positive gross wealth production. And any Bastiat afficianado should be able to accept that as true. What I’m arguing it’s NOT saying is that it will result in positive net wealth production. I agree with Bastiat on that, which is why I have never supported C4C here or anywhere else. Don’t try to attribute arguments to me I haven’t made. And I’m sure Bastiat wouldn’t appreciate you attributing his ideas to Hazlitt
You need to seriously work on your comprehension. (Or are you just dodging?)
Sam keeps asking that question because it is one of the fundamental questions wrt AGW.
It looks to me that you like the AGW issue because it’s a good excuse for government intervention. All that does is reveal your collectivist bias.
Sam’s question is simply asking for support for your assertion. So what are these negative externalities you so confidently believe in? What are the positive externalities? What is the net effect of both sets of externalities? Do you think “we” need to understand the answers to those questions before embarking on government interventions designed to solve the CO2 problem you claim exists? Or do you magically think Congress will act judiciously and review the results to make adjustments as needed to make things all better?
So you admit there is no proof?
The absence of proof is not the proof of absence. Obviously, but is it logical to assume that there are no positive externalities and likewise that the negatives outweigh the positives?Especially given that there is no evidence that CO2 forcings are significant?
By suggesting that the government CAN screw up, I’m being generous.
All is interpretation, but I hold to the view that the government WILL screw up and placing much faith in political salvation is the equivalent of putting all our eggs in one basket.
Ah yes, another disingenuous appeal to my supposed faith in the magical insights of Congress.
The whole problem with externalities is that they are very hard to measure. However, I’ve heard estimates that the total cost will be $1.9 trillion per year by 2100 for the U.S. alone – around 2% of GDP. And the U.S. is projected to be substantially less effected than places like Africa and India. So assuming the U.S. is on the low end of the spectrum, we can call it 2% of GDP when climate change really ramps up. That’s a huge cost that’s not being priced into the price for carbon.
But I’m not even sure what the point of talking about this is. You never accept anyone’s estimates if they don’t coincide with what you’ve already decided you believe. I haven’t even suggested anything draconian and yet you paint me as having an inordinate amount of faith in government. I propose modest solutions precisely because I don’t have a great deal of faith, and I’d rather just tax carbon and let the market figure out how to make the adjustments.
I think the answer to that question is obvious – they were not broken in some way. If they were, no government subsidy to destroy them would have been needed. The reasons have been explained better by others here.
But why does that question matter? Asking that question seems to assume it’s OK for Congress to implement such programs.
It all depends on what you mean by “proof”. There are really good estimates, but ultimately we’re talking about things that are going to happen in the future – costs that will happen in the future. No – there’s never proof. I don’t have a crystal ball.
But there are lots of good estimates. But as we discussed elsewhere, your simplistic view of the world pushes you to reject all those estimates that are inconvenient for you. I recognize some people hype the costs – I don’t really buy into things like the Stern Review, for example. But you take those high estimates and the low estimates presented by skeptics, and everything else, and you get the most likely scenario of what to expect.
No, that’s not proof. That’s an estimate. Stop pretending that invalidates the case.
Clearly it is not. Of course, theoretically it is but the reality is far different. The CARS program was a fairly transparent payback for the unions who supported Democrat politicians. The silly “stimulate the economy” story was just cover. the biggest possible boost would be a small, brief bubble. It’s hard to believe anybody fell for it, but there it is…
The only funny part is that lots of people used the CARS money to by non-union Japanese imports.
Lots of people like to pretend it is, but the attitude is actually that the Federal government is the top, or ultimate authority with power OVER the people, not on behalf of the people.
“It may be true that you can’t fool all the people all of the time, but apparently you can fool enough of them to run a large country.”
Will and Ariel Durant
You’d be funny if you weren’t serious.
(HINT: I’m not the one with the simplistic world view)
How do you know they’re “really good estimates” anyway? Because they support your penchant for government intervention?
DK wrote:
They did not seem to show any intention of promoting the idea that it would create wealth on net – only that it would spur a gross production of wealth.
The notion that “energize the economy” actually means “leave us with the same amount of wealth as before” is positively Orwellian. And you wonder why I call you an apologist for Obama.
RE: “(HINT: I’m not the one with the simplistic world view)”
Continuing to say it doesn’t make it true, yetanotherdave.
RE: “The notion that “energize the economy” actually means “leave us with the same amount of wealth as before” is positively Orwellian.”
Acknowledging that gross and net flows can and often do go in opposite directions is Orwellian? It happens all the time MichaelSmith!!! It’s happening now! On net we are getting poorer – but there is considerable gross wealth creation (albeit much less than there could be) going on right now.
Don’t try to attribute arguments to me I haven’t made.
You are splitting non-existent hairs. The notion that “energize the economy” actually means “leave us with the same amount of wealth as before” is just as silly down here in the comments as it was 50 comments up.
Wow! “I’ve heard estimates…” I’m sure convinced now!
It’s convenient for you to think I’ve already decided what I believe (completely wrong, but convenient). Do you try to paint me with that brush to just dismiss me? You need to stop assuming things you cannot possible know.
This is yet another case where your thinking is exactly backwards. Of course you have an inordinate amount of faith in government. It’s (almost) comical that you cannot see that. You “propose modest solutions” to be enacted by government. To think that’s even possible you have to be completely ignorant of the nature of politics. Once the government imposes itself, they will not proceed modestly. They will proceed politically, with all the badness that entails. That’s the inevitible result of what you support, therefore it is what you support.
IOW, the thing called reality needs to enter into your calculus.
RE: “Once the government imposes itself, they will not proceed modestly. ”
You’re seriously telling me with a straight face that this is the statement of an objective observer that recognizes that the world is complicated, that he doesn’t know everything, that he cannot predict the future, and that things aren’t black and white?
What I was implying by the comparison with the Texas vehicle retirement program is that the federal C4C doesn’t even have the silver lining of ANY pollution abatement, unless (and I don’t) you consider carbon dioxide a pollutant.
Acknowledging that gross and net flows can and often do go in opposite directions is Orwellian?
No, but claiming that when the Obama administration promises to “energize the economy” they are not promising an increase in net wealth — that, in fact, they could be promising to decrease net wealth — that’s what’s Orwellian. It’s completely twisting the meaning of a phrase to something completely different from what it is commonly understood to mean.
My word’s but a whisper, your deafness a shout.
RE: “unless (and I don’t) you consider carbon dioxide a pollutant.”
Aha – I see. It’s amazing these conversations can even be initiated without these sorts of fundamental definitional agreements. Oh well – no way around it I suppose.
I don’t see how I’m putting faith in political salvation by suggesting a modest carbon tax with a rebate that makes it neutral with respect to the total tax burden, and letting the market determine the solution. That’s a market salvation, not a political salvation. The only role politics plays is in nudging the market to price in costs that it currently isn’t. But the solution is entirely a market solution.
RE: “Especially given that there is no evidence that CO2 forcings are significant?”
No evidence that is concinving to you – let’s qualify. I hope you’re not speaking for all the climatologists of the world. That would be a fatal conceit.
No evidence has been presented that persuades all climatologists that CO2 forcing is significant.
by suggesting a modest carbon tax with a rebate that makes it neutral with respect to the total tax burden,
Unfortunately, your proposal is not under consideration. I might vote for you if you ran for office due to your reasonableness, but until then, I don’t expect a reasonable response from congress. I don’t even expect a reasonably coherent response from congress.
No bill that can be expected to pass ever does so without a good deal of pork, and as I think spending is of greater import than taxes, then I don’t expect much good of cobbled bills.
RE: “No evidence has been presented that persuades all climatologists that CO2 forcing is significant.”
Of course not all climatologists. I hope to God that’s not what you’re waiting on. I don’t understand that perspective on science and I don’t understand your legislative perspective either that seems to make the perfect the enemy of the good. I’m sorry, but I gave up hope that we live in a perfect world a long time ago. I don’t let it paralyze me. Anyway – this is getting thin so I suppose I’m done.
Sam, looks like a good paper (based on a quick skim – I’ll read it later). Do you wonder why it is so difficult for some to give any credibility to the growing evidence that the emperor has no clothes? It seems like people would be very happy to discover the CO2 is not the problem we’ve been told (unless government intervention is the primary goal). Is it purely faith-based? Do you have any thoughts?
Do you wonder why it is so difficult for some to give any credibility to
the growing evidence that the emperor has no clothes?
Some people are pessimistic by nature, a lot of people are informed by headlines, some people have funding/income at stake, some have their reputations at stake, and a fair number already believed that humankind is destroying the planet, and a fair number have “capitalism” in their cross hairs.
Daniel, for instance, believed that measured temperature changes exceeded the models: “My understanding is that temperature changes have exceeded projections (but that there has also been a ten year moderation).”, which is, based on all the graphs I have looked at, is decidedly NOT the case.
I’m not blind to your criticism – I disagree with it. Politics can be corrupting. I don’t agree that everything that is political is bad. This is why I say you have a simplified black and white view of the world. It’s one thing to say politics introduces major problems, that we should all be suspicious of the government, and that government intervention should be minimized. I agree with all that. I don’t see how you justify your leap of faith that everything political is doomed. And to me, that doesn’t strike me as being realistic at all. That strikes me as being naive, immature, and idealistic – not to mention fundamentally inaccurate.
RE: “When government embarks on some intervention, they will not stay on the moderate course you write about.”
I recognize this – that’s why government has to be accountable to the people and the people have to stay informed and vigilant. The fact that government messes up a lot isn’t a reason to abandon government. It’s our responsibility to hold them accountable.
RE: “I’m in the crowd trying to reach the switch to make the ratchet go the other way; you’re in the crowd making that harder to do (or maybe even helping turn the ratchet).”
See, this is the problem – you equate trying to advocate better solutions with trying to encourage bad solutions. There’s no point in even talking about this if that’s the position you take. I’m the trying to make the ratchet go the other way. I think you’re fundamentally making it harder by not only criticizing the bad solutions, but criticizing the good solutions too. That leaves a vaccuum (because of the role special interests play in politics) makes more bad solutions more likely. I don’t want that.
Thanks for the (certainly unintentional) confirmation. I do feel the need to correct a few misconceptions (and apologize if they result from my writing being unclear).
Re, “everything that is political is bad.” You grossly oversimplify my position – it is definitely not the simple black and white you suppose. I agree that not every single thing done by a political body is bad (I thought that was self-evident). The problem is that in many areas the trendline is bad (i.e. where the scope of the political increases, freedom decreases).
Re, “politics introduces major problems, that we should all be suspicious of the government, and that government intervention should be minimized.” I agree, though my opinion of minimized is radically different from yours.
Re, “everything political is doomed.” Again this is not my position, and I’m not inclined to leaps of faith. I agree that some (very limited) activities are properly in scope for government. The fact that those duties are sometimes executed poorly does not mean they’re all doomed.
Re, “government has to be accountable to the people and the people have to stay informed and vigilant. The fact that government messes up a lot isn’t a reason to abandon government. It’s our responsibility to hold them accountable.” I wish it were that way – we’d have lots fewer problems. Unfortunately what you describe is completely unrealistic and does not happen. That is an example of where I see your thinking as naïve and simplistic. Oh, and the abandon government line is a straw man.
Re, “you equate trying to advocate better solutions with trying to encourage bad solutions.” I’m not making the logical error you suggest; I have a different opinion about what “good solution” means. For the most part, what you consider a better solution is IMO a bad solution. So, from my perspective you are encouraging bad solutions.
I don’t know why or how you reach the conclusions you do about what position is, but you should stop because your accuracy is abysmal. I’m sure you sincerely believe you’re trying to make the ratchet go the other way. I just think you’re wrong, and your ideas are often dangerous and antithetical to freedom. I’ve attempted to explain why (the nature-of-politics / blind-spot thing), but I don’t think I’ve communicated successfully yet. I freely admit I’m not a great writer, but perhaps if you’d stop thinking of me as some faith-driven simplistic dim-wit it would be a good start.
RE; “Re, “everything that is political is bad.” You grossly oversimplify my position – it is definitely not the simple black and white you suppose. I agree that not every single thing done by a political body is bad (I thought that was self-evident). “I hope I’m grossly oversimplifying. That would be encouraging. You see, people on here insist that I claim to support liberty but I always inevitably support some sort of intervention, so that my insistence that I recognize the problems associated with the state ring hollow. The fact is I don’t. I don’t support the auto bailouts. I don’t support a health care mandate, I don’t support a public post office for God’s sake! etc. etc. I think I demonstrate a clear-headed understanding of the problems of state intervention. But from the same people that say those sorts of things about me, I don’t hear a single mention of where state intervention could be justified – except maybe a military or protecting property rights, etc. So you can understand why I might be a little curious how your concerns about the political process don’t reduce to “anything political = bad”. I would be very happy to be proven wrong. I’m not trying to say it that way to twist what you’re saying intentionally. I’ve honestly never seen any reason to think that that’s not what you’re saying.RE: “I’m sure you sincerely believe you’re trying to make the ratchet go the other way. I just think you’re wrong, and your ideas are often dangerous and antithetical to freedom.”And maybe that’s just going to have to be it, because I honestly can’t comprehend how you can say these things and actually think you’re backing off the ratchet instead of throwing a monkey wrench into the whole system and hoping that that helps.RE: “but perhaps if you’d stop thinking of me as some faith-driven simplistic dim-wit it would be a good start.”Faith driven and a bit simplistic. I’ve never thought of you as a dim-wit.
Re: “I honestly can’t comprehend how …”
That’s good – the first step is to recognize the problem.
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