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Let’s Start a Union of Concerned Economists
Posted By Don Boudreaux On March 30, 2013 @ 11:23 am In Crony Capitalism,Energy,Environment,Government Intervention,Hubris and humility,Man of System,Myths and Fallacies,Other People's Money,Seen and Unseen | Comments Disabled
Here’s a letter to the Wall Street Journal:
Pointing out that the percentage of Obama-era government-subsidized firms still in operation is greater than the percentage of venture-capital-financed firms still in operation, Concerned Scientist David Friedman unscientifically concludes that government subsidies to private businesses are economically justified (Letters , March 30).
Overlook the fact that meaningful comparisons of the worthiness of politically directed financing with private financing must account not only for relative rates of success but also for the magnitude of successful firms’ profits (earned in market competition) as well as for the magnitude of unsuccessful firms’ losses (incurred in market competition). How many Standard Oils, Proctor & Gambles, Microsofts, or Apples does Uncle Sam have to his credit?
Focus instead on the reality that, because the very point of subsidies is to shield recipient firms from market forces, firms that receive government subsidies should be more immune than are non-subsidized firms to competitive market pressures.
The wonder is not that many subsidized firms are enabled by their grants of taxpayer funds to continue operating; the wonder instead is that a number of such firms – despite their special privileges – nevertheless cannot make a go of it.
Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030
Without a subsidy of more words, it’s impossible in one letter-to-the-editor to do more than scratch the surface of the mountain of errors in Mr. Friedman’s reasoning. It’s a shame that so many members of the Union of Concerned Scientists – of which Mr. Friedman is a member – are so unconcerned about familiarizing themselves with basic economics.
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