Subsidies: When Free Comes at a High Cost
Paper by Johan Norberg
13. Gottfried von Haberler Conference in Vaduz, May 19, 2017
Few things are more popular than free stuff, and many politicians have built a career on handing out generous subsidies to preferred businesses and groups. This has been the case since the first cities in Mesopotamia, when a class of rulers and priests began to demand tribute and redistributed parts of it to the subjects.
Most people view a subsidy as a welcome gift from benevolent governments. But as Ludwig von Mises pointed out: “The government has no more ability than individuals to create something out of nothing. What the government spends more, the public spends less.”
Every dollar spent by governments on subsidies is withdrawn from the public, either directly by raising taxes, or indirectly, by increasing government debt. As von Mises went on to say:
“Public works are not accomplished by the miraculous power of a magic wand. They are paid for by funds taken away from the citizens. If the government had not interfered, the citizens would have employed them for the realization of profit-promising projects the realization of which they must omit because their means have been curtailed by the government. For every unprofitable project that is realized by the aid of the government there is a corresponding project the realization of which is neglected merely on account of the government’s intervention.” …
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Norberg: Subsidies (DOC, 144kb)
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