Friday, May 22, 2009

Another Example of How Governments Can Make Our Lives Worse Off

Here's Mankiw on another example of how governments can make our lives worse off when markets would have made them better off:
I got a copy of the Consumer Reports auto issue... CU recommended zero percent of the Chrysler vehicles they tested. That's right--zero. Second to last was General Motors. CU recommended 17 percent of GM models. By contrast, most other companies had half or more of their models get the thumbs up. Honda was the top ranked brand; CU recommended 95 percent of its models.

Is it any surprise that Chrysler and GM are now in the process of going out of business? From the perspective of the Consumer Reports advice, it looks like their
business model was to count on the ignorance of the buying public about the quality of their products. Their bankruptcy should perhaps be viewed as a success of the market system.

1 comment:

Fernando said...

...And the shit spreads out: the government took the GM issues in the USA, as soon as the company stand by its own legs, government interference declines. Here in Brazil, Chevrolet, GM sbsidiary, will have to walk on its own feet as indicated by the company itself.
And the feets of the brazilian subsidiary are pointed to BNDES (economic fomentation institution) just cleaning themselves on brazilian govenment's carpet to get inside the paradise of the public financing. The problem isn´t the company leaning on public assets, but the perspective of the crawling of the company indefinitively by brazilian government, including the menace of a new public company, the "Autobras", emerging from this situation.
From a government hostage of a party that treats private companies as if they were public, there isn´t any impediment.
Worst possible scenary is the government party "privatize" Chevrolet under the signature of public employees savings' funds and syndicates, controlled by it.