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08/24/2009

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Anonymous

While it is true that that accelleration of the purchase of a vehicle that would have been purchased anyway net-net is not stimulative, there is one other effect.

That $4500 that is left in the consumer's bank account as a result of the cash-for-clunkers program is not all saved. (That is assuming the market value of the clunker in the first place was close to zero. OK, that isn't a good assumption, but there were many clunkers turned in that were worth not much at all.) Some of the cash-for-clunkers money is spent on other consumer durables.

Anonymous

In a world of normal economic conditions, I would oppose the cash-for-clunkers program. But, since the feds are in the business of spending 100s of billions of dollars to stimulate the economy in the short term, what is wrong with trying to help consumers directly and give the economy a badly needed boost at the same time? How can one oppose a policy that seems to have stimulated the economy now at relatively little cost and favor giving gigantic handouts to banks and financial institutions, culprits of our recent economic recession? I can understand the importance of keeping our financial institutions from collapsing, but why not stimulate the economy in the short term, which is the intent of the Administration's Stimulus Package, at relatively low cost?

Anonymous

Dr. Posner,
I usually hesitate to proofread and post typos...

'The problem with the $787 stimulus package that Congress enacted in February, to which the "cash for clunkers" program was a belated addition, was that it was poorly designed and has been lackadaisically executed.'

I think a "billion" is missing in that sentence.

Anonymous

"Cash for Clunkers" illustrates the great peril that is at the heart of skepticism regarding Keynesian deficit spending or stimulus efforts - that the funds will not be allocated in some optimal manner but instead corruptly handed out as transfers to special interests. This is facilitated by a, "any government spending whatsoever is helpful and therefore justified" attitude.

If we had a decent and generally accepted theory on what should and should not be done by government in the event of a crisis then perhaps the suspicion could be overcome, but for now it is altogether reasonable to shift the burden of proof to the proponents of these efforts and maintain a presumption against the efficacy of these ad hoc, improvised giveaways.

-Indy

Anonymous

Keynesian stimulus can fail in many ways. Becker notes that it is usually late. Posner suggests that it doesn't have to be late, but it should be better designed. Both the timing and the design failures, however, derive from the political nature of any large special stimulus. Becker seems closer to the point. Whether its late our designed with an eye to political favorites, stimuli passed by legislatures are bound to be economically inefficient.

Anonymous

Keynesian stimulus can fail in many ways. Becker notes that it is usually late. Posner suggests that it doesn't have to be late, but it should be better designed. Both the timing and the design failures, however, derive from the political nature of any large special stimulus. Becker seems closer to the point. Whether its late our designed with an eye to political favorites, stimuli passed by legislatures are bound to be economically inefficient.

Anonymous

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If we had a decent and generally accepted theory on what should and should not be done by government in the event of a crisis then perhaps the suspicion could be overcome, but for now it is altogether reasonable to shift the burden of proof to the proponents of these efforts and maintain a presumption against the efficacy of these ad hoc, improvised giveaways.

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Keynesian stimulus can fail in many ways. Becker notes that it is usually late. Posner suggests that it doesn't have to be late, but it should be better designed. Both the timing and the design failures, however, derive from the political nature of any large special stimulus. Becker seems closer to the point. Whether its late our designed with an eye to political favorites, stimuli passed by legislatures are bound to be economically inefficient.

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Keynesian stimulus can fail in many ways. Becker notes that it is usually late. Posner suggests that it doesn't have to be late, but it should be better designed. Both the timing and the design failures, however, derive from the political nature of any large special stimulus. Becker seems closer to the point. Whether its late our designed with an eye to political favorites, stimuli passed by legislatures are bound to be economically inefficient.

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