The government subsidizes lots of commodities including fossil fuels, nuclear energy, ethanol, various crops, etc. Subsidies are the opposite of taxes. Taxes and subsidies are economic incentives that can and do change behavior. Taxes make the effective price of a good more expensive and therefore will reduce it’s consumption. This is the idea behind sin taxes on cigarettes and alcohol. Recently there has also been the discussion of adding such a tax to sugary drinks as a way to begin combating obesity in this country. Subsidies make goods cheaper and therefore encourage more consumption. The law of demand does hold that the cheaper the good the more that will be consumed. Is your consumption of fossil fuels declining as the price inches up? Did it the last time fuel prices were around $5 a gallon? One of the problems with switching to alternative fuels is that the government is creating an uneven playing field by subsidizing fossil fuels.
We here all about government staying out of market, however, I’m guessing those politicians would somehow argue against this? But it is time that we pull our collective head out of the sand and begin to have a real discussion about how to move forward. Let’s start by leveling the playing field for greener technologies like solar.
mad political economist 