My JLF colleague Jon Sanders has an excellent column out today on why economic incentives are a bad idea. A highlight:
Too often the discussion of economic incentives amounts to being pleasantly surprised that dogs like dog food. It shouldn’t be the end of the story that giving free money and tax credits for Industry X draws positive feedback from members of Industry X. What are its effects on consumers, taxpayers, the other industries, etc., from whom resources are taken to give goodies to Industry X?
It certainly isn’t surprising that, for example, the solar industry in North Carolina, which exists almost entirely because of state incentives and purchasing mandates, is trying to convince lawmakers of its vitality because of those state supports. Logically, the case makes no sense. Real successful industries don’t need permanent life support. The usefulness of the argument is determined by whether it succeeds in impressing any gullible legislator when a single vote could make the difference in the question of solar’s continued existence upon the backs of poor North Carolinians.
