Claim: Cash-For-Clunkers MASSIVELY Distorted GDP

[psychictv]

Imagine if Cash For Clunkers had been done privately by say the Alliance of Automobile Manufacturers. Do you think there would be any reason whatsoever to destroy perfectly good vehicles?

Haha, yes imagine. What possible reason could auto manufacturers have to want to take old cars off the road? I'm sure the manufacturers are just furious about cash for clunkers.

BTW, the "destroyed" cars are being sold for parts. They're not getting crushed or anything.

Destruction is never beneficial. Only the government has the ability to do something so negligent.

Destruction is never beneficial? You wouldn't tear down an unsafe building or destroy illegal weapons? It's a good thing private industry is never so negligent as to destroy perfectly good cars.

 

[Dr Adequate]

Imagine if Cash For Clunkers had been done privately by say the Alliance of Automobile Manufacturers. Do you think there would be any reason whatsoever to destroy perfectly good vehicles?

Of course not. They would sell them.

Uh ... why do you think trade-in programs exist?

 

[Puppycow]

My point is that destruction of wealth is never a good idea.

Sometimes old, obsolete, depreciated stuff is better off just cleared away and disposed of just to make room for newer better stuff. Whether it's cars, buildings or old furniture/appliances.

When you've got factories and trained workers sitting idle who could be building new cars, then new wealth is not being produced. So if destroying the old "wealth" makes it possible for new, better "wealth" to be produced, it's a net positive.

10% unemployment means 10% of people who could be producing new wealth are instead idle.

 

[kevinquinnyo]

Sometimes old, obsolete, depreciated stuff is better off just cleared away and disposed of just to make room for newer better stuff. Whether it's cars, buildings or old furniture/appliances.

When you've got factories and trained workers sitting idle who could be building new cars, then new wealth is not being produced. So if destroying the old "wealth" makes it possible for new, better "wealth" to be produced, it's a net positive.

10% unemployment means 10% of people who could be producing new wealth are instead idle.

Nope. Again, destruction of wealth is never beneficial.

Those cars were not obsolete.

If a piece of furniture, or a car or a buillding truly is obsolete, it makes it's way to the scrapyard, or parts supplier, and every last drop of money is squeezed out of it.

That's not the same thing as destroying a 1997 Jeep Cherokee with 100,000 miles on it. That's called destruction of wealth.

 

[GreyICE]

Nope. Again, destruction of wealth is never beneficial.

Those cars were not obsolete.

If a piece of furniture, or a car or a buillding truly is obsolete, it makes it's way to the scrapyard, or parts supplier, and every last drop of money is squeezed out of it.

That's not the same thing as destroying a 1997 Jeep Cherokee with 100,000 miles on it. That's called destruction of wealth.

Really. So why are the buildings still standing that are so inefficient that tearing them down would have a 10 year or less payback? Why does every home in the south of this country lack solar hot water, when the payback is often less than a year?

You're hypothesizing something you haven't proven.

 

[Francesca R]

My point is that destruction of wealth is never a good idea. [ . . . ] Destruction is never beneficial. Only the government has the ability to do something so negligent.

Lordy, make yer mind up mate!

[ . . . ]

[ . . . ] The problem with government is not only that it prevents the process of creative destruction in the private sector the process works in reverse in government.[ . . . ]

I agree 100%.

Yes I know . . . destruction is just fine if the market does it and just so evil and negligent if the government does it. Funny that.

 

[Puppycow]

Nope. Again, destruction of wealth is never beneficial.

Those cars were not obsolete.

If a piece of furniture, or a car or a building truly is obsolete, it makes it's way to the scrapyard, or parts supplier, and every last drop of money is squeezed out of it.

That's not the same thing as destroying a 1997 Jeep Cherokee with 100,000 miles on it. That's called destruction of wealth.

I know what you are saying but, the models traded in were gas guzzlers and since gas is also a kind of wealth, and the planet's environment is also a kind of wealth, the program preserves other forms of wealth. Every time a gallon of gas is burned, wealth is destroyed. And that's never beneficial, right?

Top Cash for Clunkers Trade-Ins and New Cars

Autoblog adds, "White House spokesman Robert Gibbs says the average fuel economy increase so far is 9.4 mpg; a 61% increase." Based on the first 80,000 sales, "83% of the vehicles traded in have been trucks, while 60% of the vehicles purchased under the program have been cars."

If those numbers are correct, a lot of wealth in the form of gasoline will be preserved.

ETA:
This page estimates $492 million will be saved per year in gasoline alone. That could pay for the program in about 6 years.

 

[psychictv]

If a piece of furniture, or a car or a buillding truly is obsolete, it makes it's way to the scrapyard

Which, again, is precisely where the cash for clunkers cars end up! Minus a working engine.

 

[Bob Blaylock]

Yes I know . . . destruction is just fine if the market does it and just so evil and negligent if the government does it. Funny that.

In the private market, intentional destruction of an object takes place usually only when it makes economic sense. Things do wear out, eventually, and it gets to the point where it will cost more to keep repairing something than to replace it. That's when a car would be destroyed, in the free market. It goes to a junkyard where parts are salvaged to help fix other cars that aren't quite to that point yet, and what isn't thus salvaged gets recycled to make new cars.

The “Cash for Clunkers” scam wasn't doing that, though. Most of the cars that were thus collected, were still perfectly fine cars, that had a lot of useful life left in them. Each of these cars still represented a considerable amount of genuine wealth, which was gratuitously destroyed. Every car that was destroyed under this scam left the economy poorer by the value of that car. In a time when the economy is already in poor shape, gratuitously destroying wealth was a very, very, very bad idea.

See The Parable of the Broken Window.

 

[psychictv]

Yes, except that under cash for clunkers, the cars in question went...

to a junkyard where parts are salvaged to help fix other cars that aren't quite to that point yet, and what isn't thus salvaged gets recycled to make new cars.

Why do so many of you seem to be conveniently ignoring this point? These cars didn't disappear into thin air. They weren't even crushed and sold for scrap.

 

[pipelineaudio]

Yes, except that under cash for clunkers, the cars in question went...


Why do so many of you seem to be conveniently ignoring this point? These cars didn't disappear into thin air. They weren't even crushed and sold for scrap.

Minus the engines?

 

[Bob Blaylock]

Yes, except that under cash for clunkers, the cars in question went...

to a junkyard where parts are salvaged to help fix other cars that aren't quite to that point yet, and what isn't thus salvaged gets recycled to make new cars.

Why do so many of you seem to be conveniently ignoring this point? These cars didn't disappear into thin air. They weren't even crushed and sold for scrap.

That's the proper disposition of a car that has reached the end of its useful life, that no longer contains any significant value based on its usefulness as a mode of transportation.

That is NOT the proper disposition of a car that is still in good condition and has a lot of useful life left in it as a car.

 

[Delscottio]

Are there any figures out that show the effect of reducing the supply of older vehicles, in regards to price of the remaining vehcles out there?

 

[Just thinking]

See The Parable of the Broken Window.

One thing I see missing is the idea that the glazier's only way to make a living is in the repair of broken windows ... not the case. He can make a very good living in the creation of new windows as well. Old ones need not be broken. This is representative of a growing economy, the former being that of merely a stagnant one. In the Cash-for-Clunkers analogy, destroying old cars to replace them with the exact same number of new ones is not so much growth as it is a transference of wealth ... some of which came from taking that wealth away from other uses.

 

[Just thinking]

Technically just the engines were destroyed.

The most valuable part of most used cars ... by far.

Also, the most common part of a used car to become rebuilt instead of replaced (next to the transmission).

 

[Bob Blaylock]

In the Cash-for-Clunkers analogy, destroying old cars to replace them with the exact same number of new ones is not so much growth as it is a transference of wealth ... some nearly all of which came from taking that wealth away from other uses.

There; fixed it for you.

Something else I've realized lately, is that this transfer of wealth is generally from poor to rich—the opposite of usual socialist goals. The ones who benefited from this scam were those who were in a position to buy a new car, and who had a suitable “clunker” to trade in on it.

The used car supply is reduced by this scam, meaning that those looking to buy a used car now will find fewer choices, at higher prices.

And because this scam involves intentionally, gratuitously destroying wealth, it is less than a zero–sum game; those who have been harmed have been harmed more greatly than those who have benefitted have benefitted.

Technically just the engines were destroyed.

The most valuable part of most used cars ... by far.

Also, the most common part of a used car to become rebuilt instead of replaced (next to the transmission).

The scam specifies that no powertrain-related components may be salvaged and reused. This includes the transmission as well as the engine.

 

[daenku32]

Don't forget the government destroyed several billion dollars worth of vehicles. They literally destroyed them....

Assuming the "literal destruction" part was true, I suppose $3 billion is "several", but I doubt all the clunkers were worth the full $4500 (or even $3500). A $1 billion, maybe.

 

[daenku32]

The used car supply is reduced by this scam, meaning that those looking to buy a used car now will find fewer choices, at higher prices.

Do you have any idea how many used cars there are for you to buy? If I want a gas guzzler there are plenty of them around me.

 

[Puppycow]

Here is something to consider with regard to the "destruction of wealth."

If wealth that could have been created is never created in the first place, is that not just as bad as destroying wealth? Consider the opportunity cost of vehicle assembly lines and workers lying idle when they could be producing valuable new vehicles, while people make do with older vehicles that have depreciated quite a bit. A lot of factories that had been valuable have suddenly become expensive liabilities due to oversupply. Getting rid of some of those older, least valuable, vehicles makes room for new ones that would otherwise not be created at all.

 

[Just thinking]

If wealth that could have been created is never created in the first place, is that not just as bad as destroying wealth? Consider the opportunity cost of vehicle assembly lines and workers lying idle when they could be producing valuable new vehicles, while people make do with older vehicles that have depreciated quite a bit. A lot of factories that had been valuable have suddenly become expensive liabilities due to oversupply. Getting rid of some of those older, least valuable, vehicles makes room for new ones that would otherwise not be created at all.

We all know that there will be a steady demand for new cars ... no car lasts forever in normal use. And, as populations expand, requirements change and demand grows, production will naturally increase. But when demand shrinks, for whatever reasons, production will slow down ... that's normal. Keeping production at unnecessarily higher levels in order to replace product because of non-market forces/reasons is basically an exercise in make-work economics. It's not market driven, and as such should not be considered when trying to measure market GDP.

Also ... just why do you consider older cars to be of the least value? A 12 year-old car in good condition (with low mileage) can be quite valuable to someone who cannot afford a new one.