My proposal would be to offer incentives consisting of discounts pertaining to say a new car.
For example the car companies that have laid off thousands of people are not making money like they used to. But if a program happened to arise offering 20% off of a car of any choice from that suffering company if the donation was $3000 to a nation like Darfur. This offer would most likely be agreed because of the simple fact that the program would be able to reimburse the car company offering the discount due to the amoutn of money that woudl actually be needed in these countries.
The rise in car sales would be a good way for car companies to regain form. The donated money would probably be more than most charities ever hoped to make.And also the trickle down effect going to gas companies, car accessories,of course the beneficiaries that would be the needy.
Would this be a good idea?Explain why or why not.?
03
Apr
icprofit6000
April 3, 2010 at 12:52 am
In order to evaluate your proposal, consider not the specific problem, but what should policy be?
1. What problems are you trying to solve? What are the causes of the problem? Are they problems or symptoms?
Diseconomies of scale are the forces that cause larger firms to produce goods and services at increased per-unit costs
My concern is that the car companies that you are trying to bail are too large and too slow to respond to market demands.
Here an interesting articile on Diseconomies of scale.
http://en.wikipedia.org/wiki/Diseconomies_of_scale
3. Who benifits and who pays?
The thing is it may be that you provide these incentives and instead of hiring back all the layoff worker the car company gives a big bonus to the companies executives
4. Is there more effective ways to solve the problem?
My view is in general that governments should not try and bail out a company that is not competitive and as much as I hate to see people lose their job, I would much rather have the government provide retraining programs or help them to find new job.
5. Assuming that your policy is implimented how will you measure success? How do you know if it was your policy or that situtation that changed?
6. What are the possible side effects?
As a general rule, I would like the government to move away from providing specific bail out and incentives except to offset externalities. I would much rather the government work on maintaining a free and fair market rather than have it put money into failing companies.