Two economists have analyzed the cash-for-clunkers program and
found that its economic costs outweighed its benefits by $1000
per car: With per vehicle environmental benefits at $596 and the
costs at $2,600 per vehicle, the clunker program is a net drain
on society of roughly $2,000 per vehicle. Given the
approximately 700,000 vehicles in the program, we estimate the
total welfare loss to be about $1.4 billion. The welfare loss
would be even greater if we fine tuned our estimate of the
social cost per gallon to account for the spatial mix of
clunkers. Clunkers, especially the trucks that comprise a large
percentage of the traded-in vehicles, may have been retired
disproportionately from rural locations where the social costs
of pollutants are significantly lower. Also, if the average
value of clunkers exceeds our conservative figure of $1000, then
cost of the program would be higher. Even if the environmental
gains were double our estimate, the net drain would still be
close to $1 billion. While a more rigoro