I got into an argument with a family member over recent oil price shocks. Basically, I argued that this is a good example of why the US should subsidize electric vehicles and charging infrastructure. This would protect US consumers from future oil shocks, particularly as oil becomes more scarce.

    My family member laughed at that and said that government subsidies distort the market. They are inefficient solutions because they go contrary to prices, and price is the best, most efficient, most accurate, system of macro economic information dissemination. He said, markets always find the most efficient, best way to meet consumer desire. If oil shocks are going to be a problem, the market will price it in and car companies will respond. But the market is better positioned to weigh the risk of future oil shocks better than any government will ever be.

    I want to know, is he correct? Are there historical examples where governments used subsidies to encourage industries with positive economic effect that exceeded what the market would have done in its own?

    Are there historical examples of government subsidies to strategically guide the economy working out positively?
    byu/Over-Discipline-7303 inAskEconomics



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