Whose opportunity cost?
The opportunity cost represented by the spending of resources used to build the new car.
Or think of this thought experiment: Let’s say you build a new car. Then you destroy it and build another to replace it. Did you just help the economy? Or did you hurt it?
Now imagine you destroy every car in the country, then employ as many people as needed to build new ones to replace them. Did you help the economy? If so, why not destroy all those new ones again, and employ everyone to make a third set?
In cash for clunkers, the person building the car and destroying the car are different. From the car manufacturer’s standpoint, they want “unnecessary replacement”
Now imagine that you design your cars with planned obsolescence, so that the old cars don’t have to be destroyed, they just wont work anymore, thus ensuring that people will buy new cars before the old would break down with normal wear-and-tear.
Did you just help the economy? Or did you hurt it?
I think his point goes to the opportunity cost of society. Look at all the energy and materials that go into building a fleet of cars. With it, we can build a fleet of cars pr do a bunch of other things. And since we already have a bunch of cars, of we spent those resources on other things we’d have a huge gain. But if we destroy an old fleet of cars and build a new fleet, we haven’t, as a society, gained nearly as much.
I confess I haven’t followed “Cash for Clunkers” closely as I have no desire to swap my vehicles (actually, both of my vehicles are on the “buy” list for this program, so it wouldn’t apply to me anyway), but WHERE is it mandated that the “clunkers” involved be destroyed? I don’t ever recall hearing that, so could someone provide a cite regarding that as a requirement? I guess I just sort of assumed the “clunkers” would be rotated into the used car side of things but maybe I was hasty - I just want confirmation that yes, the “clunkers” will be smooshed as part of this program.
Frankly, if folks have clunkers that aren’t running well and were planning to replace them soon this might arguably have some benefit - but yeah, it seemed to me the money ran out awful fast. Were there really that many people on the verge of getting a new car this week? I sort of doubt it.
If the intent isn’t to destroy them or otherwise remove them from use, what’s the point? Buying them and then reselling them as used vehicles means they’re still producing CO[sup]2[/sup], and they’re still competing with new vehicles, so you’re back where you started.
Are you serious? Many cars today get less than 18 MPG?
Looking over that list myself, I notice that every car on there is a minimum of ten years old and every truck is a minimum of six years old. These are not new, well preserved cars being destroyed, because those would be worth more than the $4500 the government might be willing to shell out (actual rebates will vary). These cars are the ones that are already beaten down and would have likely been given away for scrap in a few years anyway. All the government has done is speed up the process by a handful of years.
See here: Cars.gov. And here’s something from the New York Times which describes how they do it:
And to answer your question, I’ve been “on the verge” of buying a new car, i.e., waiting for my 1998 Windstar with the rebuilt transmission to finally die. It books for like $650, and I got $4,500. So it worked well for me.
So what?
The government waste money destroying stuff all the time.
He isn’t. Which makes the whole argument sort of a bizzarro underpants gnomes claim.
Let’s say it is destroying wealth, so what? You can’t make an omelet without cracking a few eggs.* Consider WWII, vasts sum were spent on creating wealth just to destroy it blowing up the other guys , and their wealth. American industry was focused solely on building things to be blown up. Yet after WWII America was incredibly wealthy. Why was that? America should have been bleakly poor, it just destroyed all that wealth.
The thing is wealth is created, but to create wealth requires money, and money comes from buyers, and buyers are people with good paying jobs that can afford to buy the stuff that pays their own salaries. Ultimately it’s a bit like a snake eating it’s own tail, except the snake also eats agriculture products, metals, and coals, other natural resources and the like. If this program ramps up American industry more then the value of the cars then it creates wealth. The only difference is it does so helping the poor, and lower middle class, instead of huge giveaways to blackwater, which, Conservatives being the selfish spoiled little sadist brats they are, hate.
*The Fight Club school of economics.
How much green house gas is created building a new car vs what is saved by not using an older one?
Hey, my vehicle is on the list. And I’m one of those rich guys that this program isn’t supposed to help!
Oops
I’m skeptical as to the extent that this exists in the modern automotive industry. Even cheap cars I have owned in recent years have proven surprisingly durable - my Chevy Cavalier had well over 100,000 miles on it and was in fine running order when it was crashed, and my Fiat Panda wore out when it was fourteen years old.
Actually, this program itself is a kind of planned obsolescence - it makes it undesirable to resell or part out an old automobile simply because the government has deemed it obsolete. But I suppose you consider this a good thing.
It’s a good question and I have no idea, especially if you want to ask about the specific costs of the different kinds of pollution created by engines vs. manufacturing. But I’m not the one making an argument about waste before I have some general idea of the full costs and benefits of the program.
This program may very well be economically stupid. But I don’t see how you answer that question in good faith while ignoring potentially significant variables. I wonder, for example, what will be the effect of upgrading the safety features of all the cars being swapped?
I am just floored sometimes by the responses here. Of course it destroys wealth. It is the definition of destroying wealth. It isn’t much different from taking a storehouse of munitions and exploding them in a field to watch them go boom or razing skyscrapers to build new ones. I can’t help but feel that this is another case of people who don’t pay a lot of taxes (lower income, students etc . . .) being complacent about the cost of programs like this. Much like what Rumor said, if you don’t have to pay the taxes for madness like this then it seems like money created from nowhere.
The entire point of the program is to take these cars off the roads, for whatever reason. I wouldn’t want the government paying $4500 to people to turn in their cars, only to have some car dealership turn around and sell the “clunker” to somebody else when the dealership didn’t pay the cost of the trade in.
I see it as a fairly quick way to stock the used car / repo car market. But let me explain.
So, you have some old clunker that is worth less than $4,500. Maybe it is worth only $1000 or less. Well, what does that say about its condition? If the vehicle was worth more than $4,500 to a trade, it would not make sense to participate in the program. So regardless of whether or not your car was “on the list”, if it has resale value greater than $4,500, then do not do the program.
Ok, in broad sweeping generalities, there are significant numbers of lower income people that have cars valued at less than $4,500. They are going to take the quick cash and buy a new car in the program. A new car with all of the taxes, fees, insurance and payments that come with ownership of a new car. If they happened to just be scraping by with their old car, how on earth will they be able to come up with the money to keep a new car? Since significant numbers won’t be able to keep it, to the used car lot it will go. Either as a trade or as a re-po.
As far as “destroying wealth”? My gut says… maybe, but not from typical sources. The clunker traded in for the program was worth something less than $4,500 and the person got a credit of $4,500 for it. Sounds like a plus, at first. The dealer gets a cut, the salesman gets a commission, the new car buyer gets more for his old car than what it was worth, the local government gets sales and/or property taxes, the insurance agent gets a new policy, the finance company gets more interest payments. So it seems like lots of people get money from the transaction. But, the person that bought the car will now need to pay all those added and recurring costs in exchange for the one time only benefit of getting a larger trade-in than the car was worth. So, it transfers or destroys the built up “wealth” of the buyer. Which, as I imply above, will often (though not always) be the person of lower income anyway. Everybody else involved makes money on the deal.
The people whose money is being spent don’t. They lose $4,500, and in exchange get a POS car worth less than a quarter of that.
Please look up the Broken Window Fallacy.