Thursday, May 12, 2011

The Politicians are Very Smart, the Voters are Smart so Why...

3. Used car prices are rising so much that many models are selling for more today than a year ago.

Thinking about the destruction of all those used cars in the cash for clunkers program. The politicians are smart but use that smarts to gain and keep office, the voters are smart but rationally ignorant. Everyone is smart but the outcome is very stupid.

1 comment:

Andy Harless said...

I don't see the problem here (except that they didn't destroy enough used cars, and used car prices are still much too low compared to the prices that would be efficient given the lack of pricing for the environmental impact of their outputs). In an ideal world, one would have priced those outputs at a level that made the cars uneconomical to drive, and, while the cars themselves would have remained physically in existence, their services would effectively have been destroyed voluntarily by the owners via disuse. As it is, new owners are paying part of the social cost via a price premium for the remaining cars. It isn't the most efficient outcome, but it's better than leaving the cost completely unpriced.