AA Blog4: Public Policy
Restrictions on New Car Purchases: An Economist’s Road Trip
In various cities across China, new policies regarding car purchases have been implemented to aid in reducing air pollution. Two main models have emerged according to the article “Restrictions on New Car Purchases: An Economist’s Road Trip” by Brian Viard, Associate Professor of Strategy and Economics at Cheung Kong Graduate School of Business. The first is a lottery system in which licenses are handed out to random winners. The second method is to auction the licenses to the highest bidders.
In my opinion, this is one small step towards improving the air quality. Not only is it reducing the amount of pollutants released by simply reducing the amount of licenses available, it is reducing the amount of traffic from reduced amount of cars on the road. Economists don’t seem to fully agree with these methods because not all options are equal after all. The chances of out-bidding the auction or black-marketing the lottery win are all options that do not favor the robustness of the model methods.
Anthony Liu, a visiting professor of economics at Cheung Kong Graduate School of Business reveals that the worst pollutants have been cut by one-third during the last decade. While it is hard to ignore that 71 of 64 cities in China fail to meet air quality standards, Liu explains how “current air pollution can even offer new opportunities for foreign enterprises building their presence in this quickly growing market”.
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