Writing this blog post a while back, I stated that the Cash for Clunkers programme was a lesson in applied economics because it revealed that the subsidy itself revealed the preference for car models by Asian manufacturing firms in addition to the fact that the surrendered models were disproportionately those made by US car manufacturers. That blog post was incomplete to the extent that it makes the assumption that the overall programme was otherwise a successful one.
Well, I am now completely chastised, having read from no less than Steven Levitt here, that overall, the cash for clunkers programme was not an unqualified success. Referring to this data based analysis, it is clear the unquestioned attribution the entire set of sales to the programme is incorrect. As he states, there are a large number of acquisitions that would have occurred regardless of the programme. So what happened is that the subsidy merely led to a change in the moment of purchase for the individuals who already made plans to purchase new cars anyway. Taking account of this shift, the Cash for Clunkers programme ends up as a waste of resources.
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