The challenge
Car sales had collapsed in the recession and old cars polluted heavily.
The case
In the summer of 2009, the US government offered up to $4,500 to people who traded in an old, inefficient car for a new, more fuel-efficient one, aiming both to boost car sales during the recession and cut emissions. The $3 billion program ran out of money within weeks. A study found it induced the purchase of an additional 370,000 cars in July and August 2009, but areas with more clunkers bought fewer cars in the 10 months after it ended, offsetting most of the initial purchases. It found no effect on employment. Mian and Sufi estimated the program led to an additional 370,000 car purchases in July and August 2009, but most of these were offset over the following 10 months.
Why it didn't work
Trying to hit two goals at once did neither well. Subsidizing purchases people were close to making anyway mostly shifted sales in time rather than adding to them.
Sources
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