Monday, July 10, 2017

Perverse Economic Incentives

For John, BLUFStimulating the economy is good thing, unless it is a bad thing.  I wouldn't want to see undertaking stimulated by the Government increasing deaths.  Nothing to see here; just move along.

From the Foundation for Economic Education and Mr Daniel J. Mitchell, Thursday, 6 July 2017.

The 2009 Cash for Clunkers program aimed to stimulate consumer spending in the new automobile industry, which was experiencing disproportionate reductions in demand and employment during the Great Recession.  Exploiting program eligibility criteria in a regression discontinuity design, we show nearly 60 percent of the subsidies went to households who would have purchased during the two-month program anyway; the rest accelerated sales by no more than eight months.  Moreover, the program’s fuel efficiency restrictions shifted purchases toward vehicles that cost on average $5,000 less.  On net, Cash for Clunkers significantly reduced total new vehicle spending over the ten month period.
Hat tip to the InstaPundit.

Regards  —  Cliff

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