Sunday, August 2, 2009

Cash for Clunkers is a Crime

Watch what the "cash for clunkers" program does to perfectly good cars.

Replacing the oil with sand in a perfectly good engine and revving it until it dies leaves the world poorer by one engine. It fits in with other Keynesian gems such as one person digging a hole and another person filling it, or burying money in bottles for other people to dig up.

The destruction of the engine is used to justify a transfer of wealth to the auto industry, which lost its free market wager on how many cars to produce. Because there are a dozen car dealerships in every congressional district, they don't have to lower prices when they have a glut of cars.

Due to the abysmal state of economic, or any kind, of literacy in this country, no one mentions the broken window fallacy.

We've only known about it since 1850.

Why not put sand in every engine in America and replace them all with a 2009 Prius?
Why not break every window in America and replace it with a more energy efficient one?

The crux of the broken window fallacy is the unseen. In the clunker program (and it is a clunker of a program), the unseen is made plain:

The House voted 316-109 to transfer money to the program from an Energy Department fund for loans to innovative energy projects that wasn’t to be distributed until next year.

By the way, Robert Heinlein anticipated cash for clunkers in a brilliant story from 1957. This is a must read.

1 comment:

Anonymous said...

What a splendid post! Incisive critical thinking!