The Temptation to Subsidize

by Russ Roberts on January 11, 2006

in Energy, Politics

Pete Geddes of the Foundation for Research on Economics and the Environment (FREE) does an excellent job in this column describing why subsidizing "good" kinds of energy (wind farms and biofuels) have perverse effects due to political manipulation and the law of unintended consequences.  An excerpt:

When we subsidize things that trade in the market, we benefit the well
off and well organized at the expense of the most vulnerable members of
society. This holds true whether in Bozeman, Boston, or Birmingham.

Geddes goes on to quote George Will.  It’s such a good quote I dug up Will’s column (from 2/4/1993 in the Washington Post) to find the context.   The column is about how streetcar companies and later taxicab companies used regulations to keep out competition from jitneys serving poor people.  The column opens:

The world, a wit has said, is divided into two kinds of people, those
who divide the world into two kinds of people and those who do not. I
say: The world is divided between those who do and those who do not
understand that activist, interventionist, regulating, subsidizing
government is generally a servant of the strong and entrenched against
the weak and aspiring.

That last part (after "I say") is what Geddes quoted.  The ending of the column is equally eloquent:

The world is divided into two kinds of people, those who want to
prosper by competing and those who want to prosper by getting
government to cripple their competitors. America is divided between
genuine entrepreneurs and those persons whose entrepreneurship consists
of turning government into a dispenser of privilege and injustice.


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