I Can Say This Much for Cash for Clunkers

It was short-lived, and it could have been worse. Yes, I thought it was a bad program, but I wouldn’t go so far as Cato’s Chris Edwards to say it was the “dumbest program ever.” Better to give away something for next to nothing than to give away something for countless calculations, changes in behavior, and misplaced investments. (If you’d like an example of such a program, look at the federal tax code!)

In some ways, the idea behind Cash for Clunkers was similar to the rationale for sales tax holidays. Both are intended to spur economic activity by giving consumers an incentive to spend on targeted items. Instead, each diverts spending from better uses, without generating new wealth.

To learn more about Cash for Clunkers, check out the entire post by Chris Edwards. For a mathematical analysis of the program’s effect on carbon emissions, see Matthew Kahn‘s August 12 post.