The 2009 program
In a 2009 episode, Bob Zadek describes Cash for Clunkers as federal legislation under which the government gives Americans who are lucky enough to have a really crummy car up to $4,500 as a voucher to use when they buy a new car. He calls it, in his own words, “a crass income transfer of my money to somebody who drives a crummy car.” He says the justification offered by Congress was twofold: the program was done with stimulus money to stimulate the economy, and it was done for environmental reasons, because it gets bad cars that are bad environmentally off the road and replaces them with better cars. Zadek states his conclusion that in fact the legislation “has a de-stimulative effect” and that it hurts the economy and the environment. Cash For Clunkers is a Dud (2009)
His guest, Katherine Mangu-Ward, a senior editor at Reason magazine, says the plan was intended for a general stimulative effect for the economy and also the environmental argument, and that if the intent had been simply to cycle the same taxpayer dollars back to the government and out to people again, it might have been restricted to American car companies only. She notes that any car built before 1984 was excluded from the plan as a result of lobbying by what Zadek calls the classic car folks, so the cars genuinely leaving a plume of dirty smoke behind them were not the ones taken off the road. Cash For Clunkers is a Dud (2009)
Bastiat and the broken window
Zadek, a San Francisco business attorney, opens the 2009 show with Frédéric Bastiat, whom he describes as a French philosopher who lived roughly from 1801 to 1850 or 1851, and quotes him: “The state is that great fiction by which everyone tries to live at the expense of everyone else.” He recommends Bastiat’s book The Law. Cash For Clunkers is a Dud (2009)
Mangu-Ward takes up Bastiat’s most famous argument, the parable of the broken window, in which a little boy breaks a window and bystanders console the shopkeeper by noting that the money will go to the glazier, who will spend it on food and shoes and stimulate the economy. The fallacy, she says, is that this ignores the loss of value to the shopkeeper, because the window has been destroyed. Applied to the program, the old cars that were junked were valuable items: Americans used to buy these clunkers from each other, and they were also shipped to the Third World, where people who would never have had a car had a chance to buy one. Zadek adds that by definition the cars had to have been in use — Mangu-Ward notes they had to have been insured in the last year — and that chemicals were put in the gas tank and the crankcase to make sure nobody would drive them again. Cash For Clunkers is a Dud (2009)
Environmental accounting
The environmental case draws the sharpest numbers in the 2009 episode. Zadek cites Christopher Knittel, described as an economics professor at the University of California at Davis, who calculated that, taking the government’s figures and stipulating that carbon emissions are removed from the air, the cost of removing one ton of carbon emissions under the program is $365. Under the Waxman-Markey bill, he says, a ton of carbon emissions is assigned a cost of $28, so the program pays more than ten times that figure. Cash For Clunkers is a Dud (2009)
Zadek also lists what he calls the environmental costs the program ignores: the environmental cost that went into building the car that is now destroyed, the cost of consuming resources to build a replacement, mining iron ore, making steel, manufacturing, shipping the new car, destroying the old one, and the likelihood that the new car is driven more, burning more gas than the old one did. He says many economists have found the program environmentally destructive, and that environmentalists ought to be going crazy over the bill instead of embracing it. Cash For Clunkers is a Dud (2009) Mangu-Ward adds the freeganism parallel — the people who eat food out of dumpsters and take furniture from the side of the road — which she calls a crazy way to live but one that reflects the environmental insight that making things uses up natural resources, “especially stuff like cars.”
Government ownership and market distortion
Zadek raises the ownership question directly: who owns the biggest car company in America, he asks, and answers that it is the Obama administration, so that taxpayer money spent at a GM dealer increases GM sales and therefore the value of the government’s stake. Mangu-Ward calls the arrangement suspicious in that light but says the failure to restrict the program to American car companies suggests the logic was focused on general stimulus and the environmental argument; still, she says, it puts a bad taste in the mouth to have essentially a government-owned car company and massive government subsidies to buy new cars. Cash For Clunkers is a Dud (2009)
Zadek extends the reductio — why not Cash for Betamax, Cash for polyester suits, Cash for transistor radios, Cash for 45 RPM record players — and argues Congress never analyzed whether the program would accomplish the desired effect or was just a way to buy votes. Mangu-Ward answers that the main desired effect was to get votes, and that this explains expanding the program from the initial $1 billion appropriation into broader expenditures pulled from stimulus money: a classic case, she says, where looking for logical, consistent, numerically backed justification is wrong and one should look instead at who it might win votes for. Zadek compares it to the mayor in The Taking of Pelham One Two Three, told that paying a $1 million ransom buys “17 sure votes,” and asks whether government should spend $4 billion of our money so the administration can buy votes. Cash For Clunkers is a Dud (2009)
Dealers, charities and political risk
Mangu-Ward describes the scramble the program created at the dealer level: Ford speeding up production of Escorts, a car popular under the program because it fit the criteria the government arbitrarily laid out; the first set of appropriations gone in four days; predictions for the second ranging from the first week of September to maybe November. When the money dries up, she says, somebody is left holding the bag, probably the dealers, who stock up on cars meeting criteria that then become irrelevant and wait for government checks — already, she says, a bunch of dealers are as far as half a million or a million dollars in the hole. Cash For Clunkers is a Dud (2009)
Zadek frames this through his own lending practice: he makes commercial loans, and one of his personal credit rules is that he does not lend where there is what he calls a political risk, because once politics is interjected it is impossible to make a lending decision. He names the losers he expects — automobile repair shops, used car dealers, auction houses that auction off used cars — and says that when government has so much influence in the market that nobody can make intelligent decisions, people wait on the sidelines and the economy is stifled. Cash For Clunkers is a Dud (2009)
Mangu-Ward adds the charitable sector: people who once gave old cars to charities that fixed them up or sold them for scrap now choose between a small tax deduction and $4,500 from the federal government. Zadek’s reply is that government never intended to harm the charities, but that the economy is too complicated, and that when government gets involved in the economy without doing the research the unintended consequences wipe out any possible beneficial effects. He contrasts the collective brainpower of 200 or 300 million people making decisions in their kitchens with the minuscule brainpower of Congress. Mangu-Ward adds that Congress’s premium on acting quickly makes adjustment harder, and Zadek notes there was no hurry here: no calamity was about to happen, and the drivers were living fairly normal lives, just with low gas mileage. Cash For Clunkers is a Dud (2009)
Across episodes: the fallacy returns
The topic recurs in a 2023 episode in which Bob Zadek and Professor Mike Munger of Duke University discuss the broken window fallacy as it applies to modern green energy policies and environmentalism, exploring the distinction between creating jobs and creating wealth, the economics of recycling, and misconceptions about landfill shortages and resource conservation. The later treatment shifts the target from a single 2009 voucher program to environmental policy generally, and Munger, a professor of political science, economics and public policy, replaces Mangu-Ward as the guest; the 2009 episode’s figures and market analysis have no counterpart in the available 2023 material. The ‘Broken Window Fallacy’ is Back (2023)
What the sources do not cover
The excerpts do not give the program’s formal name, its enacting statute, its authorizing votes, or its final cost beyond the $1 billion and $4 billion figures Zadek cites. They do not report total cars scrapped or new cars sold, and they do not present the government’s own data on emissions or fuel savings. Mangu-Ward’s remarks and Zadek’s monologues are editorial; no excerpt presents a defender of the program making the case at length. The 2023 excerpt supplies no quotes, figures or case names from Munger.