Cash for clunkers - a case study

I have written a lot about the Cash for Clunkers law, and the fact that it was a hit with its beneficiaries because it bought cars that blue-booked for just under $1500 for two or three times that amount. Other studies have shown that the program did abate some CO2, but at ridiculously high prices per ton.

But I have found a reason to love the Cash for Clunkers program: it is a fabulous demonstration project for just how utterly pointless government stimulus programs can be. Stimulus programs tend to be hard to evaluate in our complex economy — sort of like trying to calculate the effect of a butterfly flapping its wings on world climate. But since cash for clunkers only lasted a few weeks and hit only one industry, we can learn a lot about the effectiveness of government stimulus.

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