Abstract for: Systemic Analysis in Legislating: Modeling the “Cash for Clunkers” Stimulus

Legislating often may lead to unintended consequences and fail to achieve intended consequences due to the complexity of political and social environments. In this article, the authors build a system dynamics model focused on the American 2009 “cash for clunkers” legislation. The authors identified dynamic hypotheses of both intended and unintended consequences in legislative history and political commentary. Unintended consequences were suggested: distortions in new vehicle sales and production, used vehicle supply and consumer driving behaviors. Causal loop and stocks and flows models were developed. Using a Vensim simulation, the authors tested for significant statistical differences in automobile related variables with and without the legislation’s eight-week sales subsidy. The study found only short-lived effects on used car dealers, charitable donation programs, and sales of new cars. The reasoning and technique presented in this case study suggests a systematic and learning-intended alternative to the prevailing “art” of political decision making.