Interesting last 8 hours or so: Up late debating EV startups with ex-GM execs. 3 hrs sleep. Flat tire on the way to San Jose. #plugin2010 ~ stevepuma

Some random interesting stuff

Posted: February 9th, 2009 | Author: Steve | Filed under: Business, Capitalism, Cars, Peak Oil, Sustainability, Technology | Tags: | View Comments

I haven’t really been posting much lately. I guess graduating from Presidio has been a little bit harder to adjust to than I thought it would be. In any case, here’s some interesting stuff from around the web today.

This graph shows exactly what 3.6 million jobs lost in 6 months looks like. It really is something, isn’t it? [via The Gavel]

The following video describes how an electronic “run on banks” almost collapsed the ENTIRE WORLD ECONOMY in just under 5 hours, if it wasn’t for fast action by the Fed. If this isn’t a prime example of a “Black Swan” or unintended consequence of complexity, I don’t know what is. [via BoingBoing]

Earth2Tech is reporting that a proposal to give drivers up to $10,000 in incentives in return for trading in their old car for an energy-efficient one has been withdrawn from the stimulus package. Unfortunately, this item fell victim to efforts to reduce the size of the stimulus package.

When it comes to government intervention, I am very much in favor of this kind of incentive, which gives people an economic reason to do something that is good for both them and for the country. I generally prefer this kind of incentive, because it is direct, measurable, fast, and represents a positive incentive instead of a punishment. It would both stimulate the economy, by getting people to buy new cars, while speeding up the process of taking old junkers off of the road.

I hope that this item is reconsidered in the future, especially if it is tied to very strict mileage requirements on the new vehicles that can be purchased with the rebate.

The author of this article points out that Steven Levitt, author of Freakonomics, pointed out a major flaw in the proposal:

“According to Levitt, there’s a huge risk that this sort of program would distort incentives. From Freakonomics:’Let’s say the rules of the program say that a car must be at least fifteen years old to qualify for a big government subsidy to scrap it. [Note: The proposal ended up setting the cutoff at 10 years.] This gives powerful incentives to people with twelve-year-old cars they were planning on scrapping to keep driving them for three more years to collect the government bounty. Instead of reducing the number of clunkers on the road, this program could actually lead to an increase!’

Leavitt brings up an interesting point, although I can see two sides to this argument. On the one hand, you can simply change the cutoff to be based on the gas mileage of the car being traded in, not its age. The goal is to reduce the overall emissions of the U.S. fleet, so who cares if it is a 2-year old Hummer or a 10-year old Ford?

Now, on the other hand, you might want to consider the total energy (and, thus, emissions) embodied in the production AND usage of the vehicle over its lifetime. In this case, I don’t have a problem with a 10 or 15 year cutoff. If you accept this model, it’s probably not a bad thing to encourage people to keep their cars for their useful lifetimes, and thus minimizing the overall impact of the car.

Personally, I would choose the MPG option over the life cycle option, since reducing future emissions is probably more critical to solving our current dilemma.

Tags: , , , , ,

  • admin
    Auros,

    Sorry it took me so long to respond...it seems that the blog failed to notify me that you posted this, like it usually does.

    I agree with all of your comments. I think that mass transit has a lot of obvious direct economic benefits, in addition to preparing us for the coming shift away from suburban living. See the Atlantic Monthly article here: http://www.theatlantic.com/doc/200903/meltdown-...

    This will create jobs to build the infrastructure, ongoing jobs to maintain it, it brings economic benefit to areas connected by the transportation, with the attendant multiplier effect. It also cuts down on emissions if it is actually used, and encourages a more urban/walkable lifestyle.
  • I'm with you on the measurability/specificity aspects of subsidies, mostly.* And the removal of the "cash for clunkers" provision is particularly galling, because not only was it good in the ways you're discussing, it also targets people who have clunkers, which is to say, mostly the working poor, who are in the most pain and are the most likely to spend a marginal dollar (and thus provide the best "bang for the buck" when you're spending stimulus dollars). The Senate's modifications to the stimulus bill are virtually all idiotic -- they cut provisions that would be strongly stimulative like the one you're discussing, and aid to state gov'ts (where we're preventing a decline in demand, preventing layoffs from infrastructure projects, etc). And then they added in tax cuts, including one that goes to ANYONE buying ANY new car -- i.e. it lightly subsidizes somebody well-off enough to afford a new car, rather than trying to provide a BIG incentive to those who are stuck in clunkers.

    The Senate bill manages to cost more than the House version, while providing less actual economic stimulus. It's appalling.

    * In the case of stimulus spending, I'm willing to look at broader initiatives. For instance, I don't know exactly what effect building mass transit has -- the effects depend on exactly how it's laid out and priced rather than just on how much money you spend. Still, if they wrote a few billion into the stimulus plan to subsidize upgrades to CalTrain, BART, and other local mass transit systems, I'd be thrilled.
blog comments powered by Disqus