I recently read an article from Liberty analyzing the Cash For Clunkers program. It made a compelling case that the program made our country about $2B poorer on net. (No value assigned to the environmental impact, but the program did not decrease our carbon footprint either because car companies use more carbon to build a car than the car will ever burn.) Yet, Obama called the program an outstanding success, and the general public mostly agrees it was at least “not bad.”
One could argue that other experts might disagree and the program might be beneficial by some other analysis, but an understanding of free market economics should make us highly skeptical. How can paying people to destroy serviceable automobiles be a net benefit to society? This program was a text book fallacy described in a famous essay by Frédéric Bastiat called The Broken Window. In 1848!
Think about how much work it is to make $2B. If any company were to announce that they had raised $2B for cancer research, they’d probably get on the cover of Time Magazine. Then think about how swiftly government can destroy $2B and call it a success.
How would you feel if you just spent 10 years of your life raising that $2B for cancer research and then read that Obama is celebrating his program that destroyed $2B? Net zero for society, thanks for trying.
And Cash for Clunkers was a tiny program. It probably really was a success compared to other government programs, in destroying less of our national wealth.
As a people, we are ignorant of basic economic principles that could be mastered by anyone able to complete a high school education. This ignorance must be costing us dramatically more (in destroyed wealth from poor public policy) than it would cost us to educate a majority of voters, right? (Great public choice research assignment there.) If we don’t do it we are just destroying what we create.
This is why I call educating the masses about economics (more specifically, free market economics and public choice theory) the Ultimate Cause. Dramatically more resources would be available to all other causes if we truly understood the fundamentals of these subjects, the power of the free market’s Invisible Hand, for example.
Here’s a great video that relates.
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Thomas Sowell’s “Basic Economics” is also a good read, interesting and easy to comprehend. My high school economics class was virtually pointless. I believe a separation of school and state would significantly help the “Ultimate Cause.” It wasn’t until taking micro in college (non-public) where I had an excellent professor that I developed an interest and saw how it applied virtually everywhere in the real world. Sadly, far too many politicians are corrupt and driven by ideology rather than an honest quest for truth and solutions.