Destroying Our Way to Prosperity?

Last spring I sold my 1993 Toyota Camry with only 77,000 miles to CarMax for $1700. CarMax sold it to another dealer, who then sold it to an immigrant family in the Washington DC area. I know the sales chain, because we received a phone call from the immigrant family over a duplicate registration issue.

After the various markups, I imagine that for about $3000 the family purchased my reliable, scrupulously maintained, and very low-mileage car. For that family it may have been a blessing to be able to buy a reliable car for that sum of money. That’s what makes a marketplace—both parties in a voluntary transaction believe they will be made better off.

Would the country have been better off if I would have destroyed my Camry in exchange for a tax credit? Apparently some of our dedicated public servants in Congress think doing exactly that will stimulate the economy. CNNMoney reports that:

Under a bill introduced by Sen. Dianne Feinstein, D.-Calif., owners of older cars would get vouchers worth thousands of dollars toward the purchase of newer, more fuel-efficient vehicle. For the customer to get that cash, the car dealer would have to certify that the trade-in was getting scrapped and not resold. The car’s vehicle identification number (VIN) would be tracked to make sure it never shows up on a vehicle registration again.

I assume the family bought my Camry because they could not afford a new car. Perhaps they needed money for basics such as food or clothing and were satisfied with a used car. Or, perhaps they valued a private education for their children. Or, perhaps they were saving for a trip to their home country or a down payment on a house. Unfortunately, politicians like Feinstein think they know better how others should spend their money

Let’s make no mistake—destroying used cars harms the nation’s wealth and it makes us worse off. Feinstein may be chauffeured around in a limousine, but for some families the alternative to buying my used Camry is going without a car. Many of the Feinstein-type thinkers of the world are OK with this outcome too—they dream of a world where the masses are forced into public transportation and the roads are wide open for themselves. Sort of like the former Soviet Union or today’s North Korea where broad and empty boulevards whisk the Commissars around.

The idea that destruction can improve an economy was debunked in the 19th Century by the French economist Frederic Bastiat in his classic essay “What is Seen and What is Not Seen.” The essay, first published in 1848, demonstrated how a “society loses the value of objects unnecessarily destroyed.” Bastiat wrote: “To break, to destroy, to dissipate is not to encourage national employment, or more briefly: Destruction is not profitable.”

Is it too much to expect our lawmakers to research, rediscover, and put to use knowledge that mankind had already developed by 1848? Apparently so—pathetic ignorance is not a disqualification for serving in Congress.

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12 Responses to Destroying Our Way to Prosperity?

  1. igli1969 says:

    Yes, it *is* too much to ask. As I keep harping, nearly all Congresscritters are ignorant of everything except getting (re)elected. Even though some are quite intelligent (Senator Schumer comes to mind), they are extremely isolated from the real world.

    If academics are in towers of ivory, our elected officials are in towers of adamant. They are determined to remain ignorant, as they have made up their minds and don’t want to be confused by facts.

    Chris C.

  2. Nathan says:

    This is a policy proposal that pre-dates the economic crisis by quite a while, and was originally a greenhouse gas reduction plan. It is now apparently being shoehorned into the economic crisis, but that doesn’t change the fact that it’s chief purpose is environmental.

    From Brookings:

    “Cash for clunkers would also reduce carbon emissions, local pollution and oil consumption. Older cars emit far more local pollution. A California study, for example, found that in 2010, vehicles from model year 1998 or earlier will be responsible for 25 percent of miles driven but 75 percent of local pollution.

    Getting the most fuel-inefficient vehicles off the road can also be a particularly effective way to reduce gasoline consumption in the short term. Consider that if two people drive the same number of miles, the one who switches from an SUV that gets 10 miles-per-gallon to one that gets 12 will actually save more gasoline than the person who switches from a sedan that gets 30 miles-per-gallon to a hybrid that gets 50.

    What really matters is gallons-per-mile, not the more common measurement of miles-per-gallon. If both drive 300 miles, the SUV driver will use 25 gallons rather than 30, thus saving 5. But the sedan driver will use 6 gallons rather than 10, thus saving only 4. In the long run, we are going to need much more fuel-efficient cars. But targeting the worst offenders provides more benefit than many realize.”

  3. Chris,

    We are all in the same boat–ignorant about many things–but as you say the decision to remain ignorant is crucial.

    Nathan,

    My Camry got 25 mpg and on the Maryland emissions test barely registered. If this car was destroyed and a new car manufactured (with all the emissions that go into that) would the environment be enhanced or harmed?

    Does shifting individuals from very low-polluting cars like my Camry into massive (empty except in rush-hour) high-polluting buses enhance or harm the environment?

  4. James D. says:

    It seems that Congress never bothers to think things through–a symptom of the short-sighted next election view point. While the law of unintended consequences will always catch up to us, I am amused by the blind thought that destroying somewhat older cars and forcing people to buy new ones will benefit us. The only people it will benefit are the automakers, who don’t deserve our business for the cars they’ve been making (in Detroit, anyway). Never mind the pollution and environmental problems that go into producing and transporting a new vehicle around.

  5. Nathan says:

    “Does shifting individuals from very low-polluting cars like my Camry into massive (empty except in rush-hour) high-polluting buses enhance or harm the environment?”

    It enhances the environment.

    A: It makes the bus less empty, decreasing the amount of emissions per rider on the bus.
    B: It eliminates the emissions from the Camry.
    C: It reduces the aggregate number of vehicles on the road, which decreases congestion, and thus, idling time.

    Now obviously, if your choice were either to drive your Camry to the grocery store, or drive a transit bus (as a personal, single occupancy vehicle) to the grocery store, the answer would be different. I think from the way you formulated the question that your assumptions are similar to this formulation. But there’s really no serious dispute that moving riders from single occupancy vehicles to transit reduces emissions on aggregate.

  6. Jim,

    You have identified the real reason for the bill–automakers and union benefit and the rest of us pay. Of course, Congress claims we all benefit but this is absurb.

    Nathan,

    Whether the move to mass transit reduces emissions on the margin depends upon, as you say, the assumptions that you make. You’re making it a given that nearly empty buses should continue to roam the streets in non rush-hours belching foul black smoke. Of course, then getting a rider out of his car and on to the bus reduces net emissions.

    But if we instead say it is an absurd waste of resources to continue to run these empty monsters, getting the immigrant family out of their Camry and onto the bus makes no sense.

    I could go on with assumptions. A direct 5 mile trip via car may take 2 transfers and 10 miles of traveling via the bus (not to mention the lost hours of time).

    Of course there are many other concerns too, such as freedom to choose.

  7. Tesh says:

    Planned obsolescence writ large, and in law. “Spend, you little lemmings, spend! Go into more debt and save the economy!”

    Sometimes I wonder if Guy Fawkes had the right idea. Perhaps not the whole “kill ’em dead” bit, but get them out of office and start over.

  8. Jaylin4dc says:

    It’s not that congress members are pathetically ignorant. They’re not out of touch with the real world. They have more power than they ought to and have sold their influence to interested parties/lobbyists/highest bidder. Car manufacturers’ lobbyist have been successful before with bailouts, but this initiative in this bill is so brazen. Throw away all cars that were made before 199X?!? And the taxpayers will pay drivers to scrap their cars, while the car makers make profit?

    The insulting part is how they treat the American public as dumb, blind, and gullible. The icing on top of the cake is the constant fear-mongering and/or pseudo-patriotic flag waving by congress members to convince the public that their job positions and institutions are so completely necessary that we dare not question them.

    And if you do have a thought in your head and object to all the government non-sense, the political parties will just aim to get dumb sheeple to out-vote you. Welcome to America.

  9. Twum says:

    I totally agree with you (by the way I’m one of you former students). I come from a country where we do not manufacture cars and have to rely on imports, most of which are used. This kind of falls in line with what you are talking about. That being said cars that are 10 years old or more are not allowed in. I feel that is an attempt to help the environment. What are your thoughts

  10. Tesh,

    Indeed, it is absurd that to believe that the problem–too much debt–can also be the solution.

    Jaylin,

    Welcome! I basically agree but I wouldn’t rule out ignorance too. Corruption and ignorance– a very lethal combination for America.

    Twum,

    Welcome! I would need to know more for a complete analysis but banning cars over 10 years old will push up the price of cars in your country (and in our country if Congress passes this silly bill). If you examine the effects of the ban I’m sure you will be able to identify very specific interests who benefit in your country (e.g. new car importers)

  11. Nathan says:

    From Feinstein’s S.247, the Accelerated Retirement of Inefficient Vehicles Act

    “HIGH FUEL CONSUMPTION AUTOMOBILE- The term `high fuel consumption automobile’ means an automobile manufactured for any model year before 2008 for which the originally certified measured fuel economy level is less than 18 miles per gallon.”

    Barry, under the text of this legislation, your Camry wouldn’t have even been eligible for the credit if what you say about its fuel efficiency is true. The program was probably written with older cars in mind, but it defines eligibility purely by fuel economy. It also has to have been registered for 120 days before the bill passage, which would keep people from trying to turn in the car that’s been sitting in the backyard for years.

    As to your point about transit, I don’t assume that the streets have to be filled with huge hulking empty busses belching plumes of oily, noxious, black smoke. All of those loaded words were added, I assume, to make transit seem less attractive.

    I do know, from my own personal experience, that in order for people to be able to use busses, they have to be there. I live in a region with a fairly reliable bus system that runs entirely on natural gas, and because of that and rail, I don’t own a personal vehicle. However, if the busses didn’t run when I need them (and my needs vary from day to day) I might have to purchase a car. I’ve already all but stopped using the bus lines that are less reliable, preferring a longer walk to a line I can depend on.

    If I bought a car, I would probably need an old one, since I haven’t got much money. That would probably mean a less efficient one with higher emissions. So yes, an empty bus running may seem like a waste, but if you look at the bus system as a whole, it allows many people to eschew owning personal vehicles entirely, which is why there’s an aggregate decrease in emissions.

    This is especially true when you take into consideration that the populace that uses the bus system is more likely to drive a car purchased with very low price as an important feature, and is thus more likely to drive highly polluting vehicles.

  12. Nathan,

    I appreciate your comments.

    You would be surprised how low the emissions were in a 1993 Camry. Did you know that the technology exists to passively (without requiring cars to be inspected) catch the 5% of the cars that emit 95% of the emissions?

    I too support mass transit, but not the kind that you have in mind. Many people don’t realize that the formerly great New York City subway system was built by private enterprise or how extensive privately built trolley systems once were.

    What I object to is those who build transit systems that make no economic sense at the taxpayer’s expense–witness for example the fixed route Baltimore light rail that is devoid of passengers most of the day. I also object to cities that ban flexible private competitors to their fixed route systems.

    I have often flown out of Baltimore-Washington Airport and used long-term parking. If I park in private long-term parking a van immediately pulls up to my car, the driver loads my luggage and offers me bottled water. If I park in state-run long-term lots, I must drag my luggage to a bus-stop and often wait up to 10 minutes for a big bus to arrive.

    The private lot charges less. Government even when servicing parking lots can’t get away from the fixed route big bus mentality.

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