Wednesday, August 26, 2009

Cash for Clunkers Death

Here is a YOUTUBE VIDEO documenting a "cash for clunkers" death. The video is an excellent illustration of the inherent inefficiency of this public policy. The "cash for clunkers" program provides incentives for people to buy automobiles they would not otherwise have bought, while at the same time it leads to the destruction of a productive tool for transporting people and things from here to there.

The video is well worth watching, but I should warn that the audio portion is R-rated for use of the f-word (although I'm sure many watchers will find the language quite appropriate). If you look around on the YouTube web page you will see links to many other videos documenting government's destruction of productive resources.

One of my thoughts after watching this video was to wonder if there are other illustrations of public policies that directly destroy productive resources. Can you think of any?

Then, I was led to wonder if this video is perhaps a useful metaphor for any government action that involves policies outside the role of the "protective state." When government policy does something other than strictly enforce private property and voluntary contracts, government tends to become predatory, and predatory activities in an economy mean that actual prosperity falls short of potential prosperity. But, we can't easily see this because we can only ever experience actual prosperity not potential prosperity. It is difficult for us to visualize what it means when an economist points to a policy and says it diminishes our prosperity. Well, isn't this video pretty much what that means? That is, it means something that could have been real and tangible like the Mazda in this video will be lost to us.

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