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For any activities that really are that valuable, there is no need for a subsidy. The revenue from the activity in those cases exceeds the costs of dealing with

by jvm 11y ago

For any activities that really are that valuable, there is no need for a subsidy. The revenue from the activity in those cases exceeds the costs of dealing with the disaster. The efficient thing to do is end the subsidy, and have all the less valuable activities whose benefits don't exceed the costs relocate or cease.

muraiki 11y ago
Efficiency must be balanced, though. Say that we end the subsidy on agricultural flood plains, which drives up the cost to farmers, who become less competitive vs imported food. They decide to close up shop and do something more profitable, since they can't complete with imports. The end result is an increase in efficiency but a loss of food security. I'm sure other people have thought this through much better than what I just said. But it seems to me to be a reasonable argument.
- jvm 11y ago
  If your goal is people growing more food relative to baseline, you should subsidize food (which we do, intensively). If your goal is people living in flood zones, you should subsidize living in flood zones (e.g. by insuring it, which we also do). We need an answer to the latter question in this case, not the former. And one is readily at hand: the political interest of those who live in flood zones. Maybe there's some other justification, but I'll confess I'm skeptical that this outcome is globally utility maximizing relative to alternative policies.
roymurdock 11y ago
A scholarship is an educational subsidy. Should we issue a moratorium on scholarships? Should we discontinue subsidies for solar energy companies? How about the billions in R&D tax subsidies that we give to pharmaceutical/industrial/healthcare companies each year to develop new drugs, treatments, and machinery? The market doesn't always know what is right. To be more specific: the market is short-sighted and greedy, and can self-destruct an economy if left unregulated. We need to subsidize activities that have large costs in the short term, but return more over the long run to society. Or else they won't happen.
- Retric 11y ago
  Should we issue a moratorium on scholarships? State funded 'generic' scholarships simply rise the cost of tuition. Good state schools are a much better use of funds as they drive down for profit education costs to be cost competitive. Schools can easily offer scholarships at minimal costs as a form of price discrimination, but public scholarships tend to simply result in administrative bloat. Should we discontinue subsidies for solar energy companies? Yes, instead we should tax CO2 production instead of subsidizing two industry's. see: https://en.wikipedia.org/wiki/Externality https://en.wikipedia.org/wiki/Externality How about the billions in R&D tax subsidies that we give to pharmaceutical/industrial/healthcare companies each year to develop new drugs, treatments, and machinery? These should also be stopped, it's fine to fund public R&D but private R&D has terrible ROI. Drug companies spend more on advertising than R&D and really don't need help. For a solid example, the US could have a 10 year strategic food reserve for 1/10th the cost of current agro subsidies that directly result in massive health issues. PS I agree that markets are often inefficient, but subsidies then to be horrible ways to correct them. Taxes tend to be much more efficient.
  - roymurdock 11y ago
    Taxes and subsidies are two sides of the same coin. They are often used in conjunction to achieve specific policy ends. If you are pro taxes, you are pro subsidies. Perhaps not on the specific, case-by-case basis, but overall you are arguing for free market distortion through the yin and yang of government policy. I won't address your specific points as everyone has different opinions on policy, but no one has the data to rigorously defend their opinions. I simply want to refute the notion that we can allow free markets to allocate all resources within the economy.
    - Retric 11y ago
      Ok we can side step the specific examples and I agree with your point. But, at the meta level I still think taxes are generally a better solution independent of policy. Taxes are much more scalable than subsidies. AKA if A is better for society than B but B is cheaper to produce then taxing B can balance things fairly easily with consumers paying society for the external costs. But, subsidizing A is an unbound cost, adds administrative overhead, and promotes consumption of A and or B. The downsides of Taxes is there often regressive, but for something like alcohol, pollution, or speeding societal costs are often independent from a persons net worth.
briandear 11y ago
So a worker that works in Houston ought not have flood protection? Who pays when his house floods? "Industry?" Then prices rise for everyone instead of isolating the risk to those that choose to buy flood insurance.

by jvm 11y ago

muraiki 11y ago

Efficiency must be balanced, though. Say that we end the subsidy on agricultural flood plains, which drives up the cost to farmers, who become less competitive vs imported food. They decide to close up shop and do something more profitable, since they can't complete with imports. The end result is an increase in efficiency but a loss of food security. I'm sure other people have thought this through much better than what I just said. But it seems to me to be a reasonable argument.

jvm 11y ago
If your goal is people growing more food relative to baseline, you should subsidize food (which we do, intensively). If your goal is people living in flood zones, you should subsidize living in flood zones (e.g. by insuring it, which we also do). We need an answer to the latter question in this case, not the former. And one is readily at hand: the political interest of those who live in flood zones. Maybe there's some other justification, but I'll confess I'm skeptical that this outcome is globally utility maximizing relative to alternative policies.

roymurdock 11y ago

A scholarship is an educational subsidy. Should we issue a moratorium on scholarships? Should we discontinue subsidies for solar energy companies? How about the billions in R&D tax subsidies that we give to pharmaceutical/industrial/healthcare companies each year to develop new drugs, treatments, and machinery? The market doesn't always know what is right. To be more specific: the market is short-sighted and greedy, and can self-destruct an economy if left unregulated. We need to subsidize activities that have large costs in the short term, but return more over the long run to society. Or else they won't happen.

Retric 11y ago
Should we issue a moratorium on scholarships? State funded 'generic' scholarships simply rise the cost of tuition. Good state schools are a much better use of funds as they drive down for profit education costs to be cost competitive. Schools can easily offer scholarships at minimal costs as a form of price discrimination, but public scholarships tend to simply result in administrative bloat. Should we discontinue subsidies for solar energy companies? Yes, instead we should tax CO2 production instead of subsidizing two industry's. see: https://en.wikipedia.org/wiki/Externality https://en.wikipedia.org/wiki/Externality How about the billions in R&D tax subsidies that we give to pharmaceutical/industrial/healthcare companies each year to develop new drugs, treatments, and machinery? These should also be stopped, it's fine to fund public R&D but private R&D has terrible ROI. Drug companies spend more on advertising than R&D and really don't need help. For a solid example, the US could have a 10 year strategic food reserve for 1/10th the cost of current agro subsidies that directly result in massive health issues. PS I agree that markets are often inefficient, but subsidies then to be horrible ways to correct them. Taxes tend to be much more efficient.
- roymurdock 11y ago
  Taxes and subsidies are two sides of the same coin. They are often used in conjunction to achieve specific policy ends. If you are pro taxes, you are pro subsidies. Perhaps not on the specific, case-by-case basis, but overall you are arguing for free market distortion through the yin and yang of government policy. I won't address your specific points as everyone has different opinions on policy, but no one has the data to rigorously defend their opinions. I simply want to refute the notion that we can allow free markets to allocate all resources within the economy.
  - Retric 11y ago
    Ok we can side step the specific examples and I agree with your point. But, at the meta level I still think taxes are generally a better solution independent of policy. Taxes are much more scalable than subsidies. AKA if A is better for society than B but B is cheaper to produce then taxing B can balance things fairly easily with consumers paying society for the external costs. But, subsidizing A is an unbound cost, adds administrative overhead, and promotes consumption of A and or B. The downsides of Taxes is there often regressive, but for something like alcohol, pollution, or speeding societal costs are often independent from a persons net worth.

briandear 11y ago

So a worker that works in Houston ought not have flood protection? Who pays when his house floods? "Industry?" Then prices rise for everyone instead of isolating the risk to those that choose to buy flood insurance.