Why the rumoured UK car scrapping coupon is bad economics

[Peter Willis]

It is rumoured that in the next UK budget people with cars over 9 years old will be able to receive a £2,000 coupon to spend on a new car if they scrap their old car. to me this seems bad economics on many levels:

1) cars require a lot of energy and emissions to build, i cant say for sure but i imagine that the resource and energy implications of building a new car far outweigh the savings of emissions over continuing to use the old car

2) this is a stimulus to the auto industry, the only problem is that the UK doesn't really have one. it will only help some workers in factories based in the UK. should we not be supporting industries that the UK is good at

3) why not make the coupons tradeable for public transport annual passes, since we are supposed to be promoting public transport? why not recycle the old cars? im sure some third world countries could benefit from some basic transport

just some thoughts

[Andrew]

willem buiter has similar thoughts

http://blogs.ft.com/maverecon/2009/03/please-torch-my-car/

[Peter Willis]

thanks, he's very active!

[Tom]

good points, but also by giving people discounts on new cars, surely this would just encourage car firms to raise prices so as to maintain their profit margins?

[Jack Gannaway]

What about the enormous utility gain from having a shiny new car? Has anyone worked out the monetary value of 'new car smell'?

[Salivating Dog]

1. If we dont build things and make emissions...what are we going to do? Controlling emissions does not do much good, unless ALL nations on earth do so. but I see your point.

2. The UK and USA cannot afford to compete with chinese and and indian laborers, they will starve to death trying.
Where is the stimulas money coming from? If YOU are paying it back...how can you be making money from it?

3. The third world nations are buying NEW cars now. They have our jobs and incomes.