Waiting for the Subsidy
8th April 2009
The council has debated mandating hybrid purchases. But the rumor among taxi drivers is that in addition, or perhaps instead, the city or other government agency will eventually subsidize the purchase of a hybrid.
Drivers have decided that they should not purchase a Prius or other hybrid until the subsidy arrived. Buying one now would mean over-paying.
There is a memorable Dilbert cartoon where Ken from Sales kills the market for a product by describing all of the great features to come in the next version, which Dilbert notes won’t be out for another year.
No matter how may times politicians get their noses rubbed in the fact that government activity distorts markets in unwholesome ways, they persist in doing it.
There would have been two preferable possibilities: for the government to come forth quickly with its subsidy, or make it clear from the beginning that no subsidy was coming. With both Chicago taxis and the secondary market for mortgages, the government did neither. Instead, it only fueled rumors that subsidies were on the way, and froze the same markets it intended to stimulate.
The only thing that saves us is that we don’t get all the government we pay for.