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1) I read a lot of economics blogs and I see many economists who are against "government picking winners and losers" in the form of subsidies; but favor, e.g. r
by othermaciej 14y ago
1) I read a lot of economics blogs and I see many economists who are against "government picking winners and losers" in the form of subsidies; but favor, e.g. revenue-neutral carbon taxes. There are strong economic reasons why the two are not at all the same.
2) Direct government subsidies for favored corporations is likely less economically efficient than doing nothing in cases. Subsidy decisions are not guided at all by the info encoded in the price system, and are instead likely to be based on rent-seeking by favored interests groups. See <http://en.wikipedia.org/wiki/Economic_calculation_problem> http://en.wikipedia.org/wiki/Economic_calculation_problem...;
Your original comment cited "basic economics" and implied that the government would be better than the market at "picking winners and losers" in the face of negative externalities. But that is not a consensus view among economists.
- rayiner 14y ago> Direct government subsidies for favored corporations is likely less economically efficient than doing nothing in cases. In cases, yes. Given the sheer magnitude of thee externalities in environmental situations, not likely. We're talking trillions of dollars of implicit subsidies here.
- othermaciej 14y agoI believe you are committing the "Yes Minister" fallacy: "Politician's logic: We must do something. This is something. Therefore we must do it." Direct government subsidies create deadweight loss, and by hurting the competitive position of companies and technologies that don't get the subsidy, they can actually make the negative externality worse. You can't justify a bad intervention just by pointing to the magnitude of the externality.