Friday, July 31, 2009

Government Gets Another Lesson In Supply And Demand

In the original draft of my post about the Cash for Clunkers program I included a couple of paragraphs about how it was a basically a big pool of free money. Using the law of supply and demand, a free resource generates a huge demand. I predicted that the pool (around $1 billion, I believe) would run out quickly. I speculated that was the real reason for the changing of the fuel economy ratings for so many cars.

In the end, I cut that part out because it was speculation; nothing in the linked article provided any proof of that. Looks like I was probably right though, as the government is poised to suspend the program because the money is being used up too fast.

I hate to tie everything to healthcare (though I'll keep doing it anyway), but what's going to happen when there's a big pool of "free" healthcare? After all, people won't pay anything out of pocket; it's all paid for by tax money. It will be just as free as the tax money used to pay for the Cash for Clunkers program. Which is to say, it's not really free at all. How quickly will that pool of money run out?

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