Here at Mises Daily, we often poke fun at left-liberal Democrats for their Keynesian ways. To prove that this is about ideas, not parties, today we’ll focus on a recent blog post in which Republican economist Larry Kudlow came out in favor of extending the “cash-for-clunkers” program.
As we’ll see, Kudlow’s arguments are pure Keynesian nonsense. Sadly, many of today’s ostensibly radical, “free-market” economists basically look at the economy in the same way as Paul Krugman. They just have a slight technical disagreement over the best way to prod people to spend money. Only the Austrian approach offers a different paradigm and allows us to see just what is wrong with the “aggregate demand” view of the economy. FULL ARTICLE
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I saw him talking about this the other night and he was like “I know there is no such thing as a free lunch but sometime you can get a free….sandwich”
I was like “what?”
“â€â€Sadly, many of today’s ostensibly radical, “free-market” economists basically look at the economy in the same way as Paul Krugman. “‒
Krugman at least is honest enough not to pretend he is a “free market†economist, Kudlow on the other hand likes to talk free market but will always come down on the side of government handouts to his favorite corporations or government spending on his favorite projects. With friends like Kudlow, the Free Market does not need any enemies.
Who needs socialists when you have people like Kuldow?
Kudlow is in the entertainment business disguised as an economist, he surely knows the BS he is saying
is just that. Kudlow needs an audience to entertain everyday and he is successful at that. No need to give him recognition from a site such as this.
Kuldow is a rent seeker. He probably loves Cash for Clunkers because he has a lot of stocks in the Autos right now. It’s all about incentives.
Kudlow works for NBC; an all Obama network. He’s had some terrible personal problems that have, frankly, somewhat diminished his capacity. He’s a kind of likeable old guy who yells louder than the rest of the CNBC people during the “8 is more than enough” commentary time.
What more do you want? Get your economics where the getting is good; and you know where that is, Baby.
The best part of the CFC program:
They destroy the crankcase of the engine – the part least responsible for the poor fuel economy in most cases – And leave the fuel delivery and mixing system – the parts *most* responsible for poor fuel economy – intact.
After which, the vehicle is placed in a junkyard for six months where the system can be harvested and used/sold by anyone with tools.
Epic fail.
It would be nice if you didn’t take what he said out of context. He said that GIVEN that we are going to spend all of this money on the stimulus plan then the cash for clunkers is probably the best (least worst) alternative. What is wrong with that? Nothing, if you are wondering. Doing nothing and letting the market work its way out isn’t an option. Congress has appropriated the $787B. The best that can be done is to see that it isn’t totally wasted.
Kudlow has been a Keynesian crackpot since his days in the Reagan administration.
It turns out that many of the “supply siders” were simply crackpot Keynesians.
Bruce Bartlett has been showing his crackpot Keynesian side during the crisis, Laffer seems unable to see the world through non-Keynesian lenses, etc.
What Congress hath appropriated, Congress can ‘unappropriate’.
If you think “Cash for Clunkers” is bad wait till the Chevy Volt arrives. This is Prius look-alike. However, it claims to do 40 miles on a single 40 cent charge and 230 miles to the gallon. I saw a proponent on Neil Cavuto:
“The average person drives 40 miles a day and will never need to fill up with gas.”
“If gas goes to $5 a gallon, these cars will become attractive.”
The big problem is that the Volt will cost $40,000. That is a $15,000 – $18,000 premium over the $22-25K Prius.
At 40 miles a day, 50mpg and $5 a gallon gas, thats about $30 a week. It would take 500-600 weeks or 10-12 years to get your money back.
This is the problem with government planners. To make the Volt attractive, it will need a $15,000 tax credit or government rebate.
There are two other things that will make this product unattractive to buyers.
1) The Prius, as Al Gore jnr and Steve Wozniak have found out, has a top speed of 105mph.
2) The 40 mile electric range is for low speed city driving. Many of the people in California who are the potential targets for this vehicle drive to work on the freeway, and often drive more than 20 miles each way.
It seems like Government Motors has all its eggs in one basket. They claim that the battery pack will last 10 years. If this is the case, they have the solution to the 20% per year drop in charge capacity for lithium ion batteries. This seems doubtful – I can’t buy a 10 year battery for my laptop.
CFC is opportunity for many people who never had a government handout to experience the dole. They will discover that consuming OPM (sounds like opium, is equally addicting, stands for OTHER PEOPLE’S MONEY) is easier to start than stop. Once they take the bait and government sinks its hook in them, they need no longer maintain the charade of being free. I wonder how many takers of CFC know the story of how an old mountain man acquired a very large herd of wary, wild pigs for nothing more than a little fencing and a few bushels of corn? PIGSOOUUEEYEE!
The Chevy Volt will be forced on us one way or another. Either by giving out government incentives or by penalizing competitive alternatives. After all, this is the new government motors as mentioned.
I agree with Walt, except for the top speed issue since in CA commuters rarely can go over 20 mph on the freeway anyways (just being facetious).
Walt D. -
Not only that, but that “230mpg” number they are tossing around is completely ridiculous. As soon as you cross the threshold from all-electric to gas-generator, the mpg is much lower.
Using an average number for a “daily” distance as a part of an overall-usage metric, like mpg, is downright bad math at best, completely dishonest at worst.
For a much better explanation than anything I could come up with, check out this guy:
http://scienceblogs.com/goodmath/2009/08/the_chevy_volt_gets_230_mpg_on.php
Walt -
You’re right…it’s absurd to actually pay for a Volt. However, be careful about throwing around bad comparisons. The reason a battery in the Volt can last 10 years and the one in your laptop cannot is because of the ways the Volt will manage its battery. Lithium ion batteries should never be fully charged or fully depleted. Thus, they way we use our laptop batteries is actually quite abusive, and causes them to fail (but that’s considered OK because the laptop itself will fail because of being carried around all the time). To prevent early failure, the batteries in modern electric cars are never charged above 80%, and they aren’t allowed to discharge below 30%. That’s right–you only get 50% of the total capacity to play with, but it will last because it is being babied that way.
Still, to pay such a premium to save so little is ludicrous, and the money calculations pretend that everyone using electricity to charge their cars will be not raise the price of electricity.
“If you think “Cash for Clunkers” is bad wait till the Chevy Volt arrives. This is Prius look-alike.”
A rental agency tried to shove a Prius on me once. Once. The controls were apparently designed by a bright 15 year old who likes video games. Seriously, the gear shift was a little tiny joystick thingy that was mounted where the radio should have been. I asked the rental agency for another, real, car. I wouldn’t own a Prius if Toyota paid me to.
Robert Murphy writes: “[W]hen one of the most visible cheerleaders of capitalism does the same — and proudly — it’s really disappointing.”
You mean like when George Bush says he has to destroy free markets to save them? We’re still suffering because liberals claim George Bush supported free markets.
I completely agree with Greg Ransom. The whole supplyside economics is Keynesianism wrapped in a nice & deceptive packaging.
Sure, real men ride horses and use typewriters. Progress? That’s for sissies. /sarcasm
If we had real property rights and your neighbors could sue you efficiently for pollution we would all be driving electric cars a long time ago. Why some people on such an enlightened website continue to carry on with such nonsense about how electric cars are impossibly expensive/infeasible/otherwise useless is beyond me.
Nathan,
electric cars are only non-polluting IF the electricity is generated by Nukes, wind or solar. unfortunately, it doesn’t shine at night nor is the wind strongest then. Nukes are the cleanest, safest, and, yes, cheapest source of energy. The same people who love electric cars hate nukes. It takes years of therapy to come to that psoition.
As it stands using electric cars just shifts the pollution to someone else’s backyard and, actually, increases the total amount due to the laws of physics.
i fail to see where any of their discussion is nonsense.
Electrical generation through Oil/NG is 40-60% efficient. The internal combustion engine is less than 20%. Concentrated power generation is roughly 10 times cheaper than burning gas in an engine.
Try again.
@Nathan:
I’m not saying that electrical cars are an impossibility, I’m just saying let the market produce electrical cars that the market really wants, not try to force little green clown cars down peoples’ throats. I will drive a Prius when then wrap my cold, dead fingers around the steering wheel.
@Jim. Don’t forget hydro which is likely cheaper than all the ones you mentioned. The downside is it’s environmentally unfriendly to the river ecological system.
The most unfortuante event is that western Politics has shifted from Political Economics to Eco-Politics – the latter as a positive manipulation of Men & Material resources for keeping the incumbent Political set up ‘staying in power’ – and the world around keeps ‘imitating’ the west.
Whether it is ‘socialism’ or market-economy – the governments abuse them for their electroal politics.
Lowering of the age of Voting right has helped the bad governments to stay on.
If US’s housing loan and Indian’s farmer’s loan indiscretaions are blatant instances of utterly irresponsible and uncaring regimes.
Bernard Shaw’s ‘Tirade’ Talk at the American Political Academy — in late thirties – on Private Finance and Public Finance… needs to come out of the ‘archives’.
vedapushpa
social anthropologist
Bangalore – India
how convenient larry’s blog doesn’t allow comments. larry kudlow… you need to be hung from a tree and horsewhipped.
Nathan,
I will try again. Electric generation from oil/gas is 40% efficient at best, while coal is 33%. Internal combustion is above 20%. The efficiency of the electric car in converting electricity into output is not 50% so the net effect is to be worse than the internal combustion.
Thank you for criticizing Mr Kudlow in his support for billions for clunkers. I have enjoyed hours of watching Larry Kudlow; he is entertaining and often has an interesting Kudlow caucus. He likes to promote king dollar and free market capitalism. The basic truth is that Mr. Kudlow feels good when the Dow is up and bad when it falls.
Bailouts including clunker money, 2 wars, Medicare, Medicaid and the new health care reform are killing king dollar. The dollar index has fallen from about 120 in 2000 to less than 80. I cannot wait to hear Mr Kudlow’s explanation when the Dow is
15,000, oil is $400, gold $4,000 and a Euro costs $5. Kudlow 101 will have to explain to the audience that limited government, free markets, low taxes, a strong currency and economic freedom lead to stable prosperity.
The US needs more nuclear power plants, off shore drilling and abolishment of corporate taxes on domestic manufacturing. We do not need to weaken our dollar further by subsidizing people to go into even more debt to buy new cars. Poor policy choices will cause higher taxes, stubbornly high unemployment and in a few years terrible inflation.
Lithium Ion batteries + AC motor is greater than 75% efficient. Along with the ability to easily convert momentum back into energy.
ICE breaks 20% if you treat it very well (coast as much as possible) and lacks the ability to turn momentum back into energy. In the city, 20% is impossible, while electric cars are most suited for stop and go conditions that 95% of the population drives every day.
Electric cars are on the horizon, no matter what the government does. I don’t particularly like what the government is doing (anything it does really) but I’m not going to blindly call new technology “designed by 15 year old nerds” and refuse to use it.
@Nathan.
Fine. So don’t refuse to use it. If others do, and it ends up being their loss, what is it to you?
Keynes Was Really A Conservative….. at least according to Bruce Bartlett:
http://www.forbes.com/2009/08/13/john-maynard-keynes-conservative-opinions-columnists-bruce-bartlett.html
Seeing how conservatives are equally in love with the State as liberals, maybe he is right that JMK was a conservative. I find it amazing how a “free market advocate” like Bartlett has recently acquired an affinity for Keynesian economic theory since Obama won the election. Do and say anything just to be relevant in DC I suppose.
So government should subsidize the buying of cars.
More deficit spending from government (on top of all the other TRILLIONS in wild spending), and hitting other industries – by getting people to buy cars rather than other things.
“No you do not understand – people will save less in order to buy cars”.
So Americans, who already save almost nothing, are being encouraged to save even less – so that perfectly functional cars can be destroyed (a pure waste) and new cars bulit (which, somehow, is supposed to “help the environment”).
And all this from a “free market” economist.
“Why some people on such an enlightened website continue to carry on with such nonsense about how electric cars are impossibly expensive/infeasible/otherwise useless is beyond me.”
Probably because it’s been self evident so far. Where is the electric car that I would want to buy? Even the best one that I know of on the near horizon, the Volt, will only get no better mileage for me than a much, much cheaper standard car. (It claims 250 MPG, but that is only for the cases where you don’t drive much or any over 40 mi a day.) Making a laughable claim that we would have been driving electric long ago doesn’t help your case.
Anyway, I just read something in Slate related to this. They liked the attempt but pretty much dissed the C4C program on ecological/economic terms based on their analysis that if the average buyer keeps their car for 10 years (!!) the cost per ton of CO2 eventually saved is at best $170+. At this time, a ton of CO2 is trading at $17 on the Euro Climate Exchange!
So obviously, it is a fail for the environment. It also seemed to be a little bit biased toward the Government Motors (GM/Chrysler) in that there is a wt limit that excludes the high end of Ford’s truck’s and vans. Why exlude Ford’s F-150 trucks? They aren’t gas guzzlers?
Jim: “It would be nice if you didn’t take what he said out of context. He said that GIVEN that we are going to spend all of this money on the stimulus plan then the cash for clunkers is probably the best (least worst) alternative. What is wrong with that? Nothing, if you are wondering. Doing nothing and letting the market work its way out isn’t an option. Congress has appropriated the $787B. The best that can be done is to see that it isn’t totally wasted.”
I’m pretty sure that context WAS included in the above article. And given that Kudlow is almost salivating over the C4C program in certain parts of the article, his protestations, to the extent you can detect any protestation in them, rings of the Br’er Rabbit character asking insincerely not to be thrown into the briar patch.
But then you ask: “What is wrong with that? Nothing, if you are wondering. Doing nothing and letting the market work its way out isn’t an option.”
Duhhh-what? So if we arbitrarily decided that it was as equally important to stimulate the home-construction industry as we’ve just arbitrarily selected the auto industry (OK, we all know the biggest Union wins, so don’t poke me on that), then you wouldn’t object to going around throwing rocks at windows and then handing out $45 vouchers to go buy new windows? And if $1 Bn was good, and then $2 Bn is better, lets just go all out with a $500 Bn program! We’ll have the bestest economy ever!!
BTW, I’m pretty sure that the appropriation is entirely new ‘emergency’ appropriation for the purpose of C4C, not drawn from previous appropriations. You appear to think it’s drawing on already appropriated money.
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