Wednesday, August 05, 2009

More on Cash for Clunkers

Here's some more on the environmental effectiveness of Cash for Clunkers. Nina Shen Rastogi argues that it was too costly. This AP piece makes the same point, claiming that the program will save the equivalent of shutting down all cars and power plants in the country for one hour--a miniscule fraction of our annual pollution production. Jeffrey Miron, one of my favorite economists (if you haven't read his 1995 Journal of Economic Perspectives article on the economics of drug prohibition, you should do so immediately), argues against the program here.

It has surely stimulated auto sales, although with a $3,500 or $4,500 subsidy, you can stimulate lots of things. It would make more sense to give people a payroll tax cut or even a direct payment, so they can spend the money on what is important to them, rather than trying to decide what specific products people should be buying.