Here’s the thing about subsidies: They encourage people to do more of something than they would have under normal circumstances.
That’s okay if the activity the government is subsidizing creates an overall benefit for society — like better educated kids, or a cleaner environment.
But if said subsidy encourages behavior detrimental to society, well, that’s just bad policy.
I guess it shouldn’t be surprising then that President Obama’s Cash for Clunkers program — which paid people to buy more fuel efficient cars — is being described as a failure.
According to a recently revised evaluation [PDF] from the environmental group Resources for the Future, the program did little to improve the efficiency of the nation’s private auto fleet.
Erica C. Barnett at Network blog PubliCola explains:
According to the report, “the average fuel economy was only 0.65 miles per gallon better than it would have been among newly purchased cars had the program never existed.” Additionally, 45 percent of the new-car buyers who took advantage of the program would have bought new cars anyway, the study found.
