“The surest way to guarantee a product’s failure is to subsidize it.”

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Written By:
Rob Port

May 24, 2012
11:53pm

So says Mark Perry, noting that huge amounts of subsidies for hybrid and electric cars haven’t exactly resulted in a lot of success for the “green car” industry.

Since 2008, taxpayers have spent or provided loan guarantees of $6.5 billion for electric vehicles. That includes $2.4 billion for battery and electric drive component manufacturing, $3.1 billion in loan guarantees for electric vehicle projects, and $1 billion in tax credits for the vehicles. The price that American taxpayers pay for commercializing electric vehicles is painfully evident in the billions spent on green projects that are driven by politics rather than performance.

Using taxpayer dollars to favor one automotive technology over another is contrary to the free-market principles that undergird our economy. Simply put, subsidizing electric vehicles doesn’t make economic sense.

The surest way to guarantee a product’s failure is to subsidize it. Over time, cars that succeeded in the marketplace have been those that were developed and commercialized without government involvement. If a technology isn’t capable of succeeding on its own economic merits, there’s no amount of taxpayer support that will ever make it a commercial success.

To put it another way, products that work and for which there is a market don’t need to be subsidized. Products that are inferior to their counterparts on the market are the ones that need to be subsidized. And the taxpayers really shouldn’t be asked to subsidize inferior products.

This applies to all things that are subsidized, be it “green cars” or “green energy,” etc., etc.

By the way, doing the math on Perry’s figures, he notes $13 billion in subsidies for green cars. According to Wikipedia, some 2,263,924 hybrid/electric cars have been sold since 1999 when they first became available on the market.

That works out to a per-car subsidy of roughly $5,742. Of course, not all of those cars may have gotten all the subsidies. They may not have been available when some were sold, and some purchasers may not have applied for their credits, but still it’s a massive subsidy.