Cash for Clunkers: A good natural experiment for measuring effects of air pollution?

Okay, I know everyone, including me, has complained about C4C not providing all that much in terms of CO2 abatement. But there must be a fair amount of other pollution benefits, like reductions in NOx, SOx, and CO, all of which have reasonably well-measured negative externalities, like infant mortality and asthma.

Another benefit could be for researchers. This seems like a decent natural experiment for looking at effects of air pollution. In at least in some parts of the country this must have reduced air pollution by a measurable amount. It helps that the program was implemented so quickly and during the more-polluted summer months. It looks like all $3 billion (or more) will be spent by Monday. There have been a few air pollution natural experiments in recent years but there must be room for another.

Alternatively, it shouldn't be too hard to calculate air pollution differences based on what we know about the cars clunked and bought under the program. Couple that and/or measured differences with earlier studies on the effects of air pollution on mortality, asthma, and other ailments, and we'd have the makings of a nice benefit analysis. Sans stimulus, of course (GM says they are ramping up production).

Aside: how does one do welfare analysis of stimulus effects anyway? This may be a stupid question, partly a product of my not being a macroeconomist. If anyone who reads this knows where I should look I'd be interested in learning about it.


  1. Richard Posner, a much better economist than I, says "No one has the faintest idea what effect the stimulus has had" here. (The quote is in response to Christine Romer's claims that the stimulus is responsible for the GDP trends in the second quarter of this year). There simply isn't consensus among macroeconomists how to separate causation from correlation, and the truth is you are probably as qualified as any macroeconomist to do some type of welfare analysis of the stimulus.

  2. Pete,

    Richard Posner is not an economist. He's a Judge with a deeply Libertarian philosophy and close ties to the old Chicago School of economics.

    Richard Posner's attack of Christine Romer was misplaced and can be traced to some simple math errors. See Menzie Chinn over at econbrowser or Brad Delong.

    Anyhow, while there is a lot of uncertainty about multiplier effects, the size of the multiplier doesn't really translate to a standard measure of economic welfare value as economists traditionally measure it. Indeed, GDP (a measure of output) and employment, while useful measure, are nothing like our standard notion of welfare (consumers surplus, producer surplus, equivalent or compensating variation).

    A hard core Chicago School libertarian will always say there are zero or negative welfare implications from stimulus spending. But that assumes stimulus doesn't stimulate. That position is very hard to square with the facts.

    Assuming stimulus does stimulate, how do we translate the extra growth into a welfare measure of some kind? I don't know.

    But I think the answer matters for evaluating different kinds of stimulus, like unemployment benefits, aid to states, tax cuts, or "green" subsidies.


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