Junk yard economics

Bill Bonner ponders the public vandalism that it America's 'cash for clunkers' programme.

Last week, the US extended its 'cash for clunkers' programme. It calls for destroying car engines. So, mechanics pour sodium silicate into the crankcases. "It just don't make sense," said a used-car-parts salesman in Dayton, Ohio. This week, we open up the hood and take a better look. Does it really make sense, we ask? In answer, we guffaw. Then we invite dead economists to guffaw with us.

Richard von Stigl, among others, pointed out in 1923 that there is a big gap between real economics and the vulgar economics that drives policy decisions. On the one hand, serious observers study what happens in a pure, natural economy and draw their truths from its crystal streams. On the other, the meddlers distort the economic world so much that the observations of the old economists hardly matter. Downstream from the meddlers' camp, the water is not even fit to drink. In theory, as well as in fact, the planners never know what they are doing: "The ... knowledge of the circumstances of which we must make use never exists in concentrated or integrated form," began Friedrich Hayek in 1945, "but solely as the dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess."

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