The Gander Is At Least As Guilty as the Goose

by Don Boudreaux on August 31, 2010

in Energy, Environment, Other People's Money, Property Rights, Subsidies, Taxes

Here’s a letter to the Wall Street Journal:

Alexander Koukoulas says that “power rates do not include the environmental costs associated with fossil-fuel” (Letters, Aug. 30).  [Corrected: No more accidental elipsis]

Suppose this claim is true.  Mr. Koukoulas’s conclusion that government should therefore subsidize green technologies doesn’t follow.  Indeed, his conclusion is made suspect by the same logic that leads him to believe that fossil-fuel prices are too low.

If fossil-fuel prices don’t reflect the full costs of fossil-fuel use, it’s because fuel producers and consumers force some of these costs onto other people.  These producers and consumers take other people’s resources (such as clean air), without compensation, as a by-product of fossil-fuel production and consumption.  But the very same sort of “negative externality” exists with government subsidies.  With subsidies, government officials take other people’s resources (mostly, tax dollars), without compensation, to be given away as subsidies.

So just as the fossil-fuel industry’s free-riding on other people’s resources causes too much fossil fuel to be produced and relied upon, politicians’ free-riding on other people’s resources causes too much government to be produced and relied upon.

Sincerely,
Donald J. Boudreaux

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