EWOT #2

This week in recitation we talked about why it is not clear to economists why destroying cars in the cash for clunkers program would be better for the economy. There are two possible reasons that I came up with to answer this. One answer is that by destroying cars and building new ones, you have to use energy. The production of this energy uses fuel which pollutes the environment. The amount of pollution produced to get these new cars made and old ones disposed of will most likely cause more harm to the environment than the amount of pollution reduced in car emissions of the new cars compared to the old ones. Also by destroying used cars, it decreases the amount of used cars on the market which will drive up the price of used cars. This relates to the supply and demand topic that professor Rizzo discussed in class. By destroying the supply of used cars, the cost for used cars will increase since there is less of them. This means that poor people will not be able to afford the pricier cars causing them to not put money into a newer car and reducing the amount of money being spent on cars which was the original reason for the cash for clunkers program. The decision to destroy the cars turns cash for clunkers from a good economic program to a bad one.