Gourt > Society > Issues > Economic > Price Controls and Subsidies
In economics, a subsidy is generally a monetary grant given by a government to lower the price faced by producers or consumers of a good, generally because it is considered to be in the public interest. Subsidies are also referred to as corporate welfare by those who oppose their use. The term subsidy may also refer to assistance granted by others, such as individuals or non-government institutions, although this is more usually described as charity. A subsidy normally exemplifies the opposite of a tax, but can also be given using a reduction of the tax burden. These kinds of subsidies are generally called tax expenditures or tax breaks.
Subsidies protect the consumer from paying the full price of the good consumed, however they also prevent the consumer from receiving the full value of the thing not consumed – in that sense, a subsidized society is a consumption society because it unfairly encourages consumption more than conservation. Under free-market conditions, consumers would make choices which optimize the value of their transactions; where it was less expensive to conserve, they would conserve. In a subsidized economy however, consumers are denied the benefit of conservation and as a result, subsidized goods have an artificially higher value than expenditures which do not consume. Subsidies are paid for by taxation which creates a deadweight loss for that activity which is taxed.
Overview
In standard supply and demand curve diagrams, a subsidy will shift either the demand curve up (subsidized consumption) or the supply curve down (subsidized production). Both cases result in a new, higher equilibrium quantity. Therefore, it is essential to consider the price elasticity of demand when estimating the total costs of a planned subsidy: it equals the subsidy per unit (difference between market price and subsidized price) times the higher equilibrium quantity. One category of goods suffers less from this effect: Public goods are — once created — in ample supply and the total costs of subsidies remain constant regardless of the number of consumers; depending on the form of the subsidy, however, the number of producers demanding their share of benefits may still rise and drive costs up. More on [ Subsidy ]
Subsidies = Increased demand Price controls = Decreased supply This is NOT a winning combination. And it really is that simple.
Logicologist (Sean W. Malone) Sat, 02 Jan 2010 21:04:24 -0000
Subsidies = Increased demand Price controls = Decreased supply This is NOT a winning combination. And it really is that simple.
Broken Ladder: Government Thwarts Affordable Housing - An article examining the failure of public housing projects in Washington, DC, citing problems such as lack of maintenance, poor social environment, and lack of motivation for tenants. Also argues against alternative plans such as housing vouchers and subsidized construction in favor of privately owned housing.
Cato Institute: How Rent Control Drives Out Affordable Housing - Analyzes the results of rent control policies and the effects when such policies are removed and argues that rent control does more harm than good. Features both a synopsis and a full analysis.
Meta Description: [ Promoting an American public policy based on individual liberty, limited government, free markets and peaceful international relations. Extensive library of studies, articles and monographs available ]
Corporate Welfare Information Center - Large database of information on United States government subsidies to corporations, including general information, specific examples, statistics, sample reform legislation, and mailing lists.
GRRN: End Subsidies for Wasting Campaign - Organization working against government subsidies in the United States to industries such as mining and timber firms, waste hauling, and landfill owners, giving them an unfair advantage over sustainable and resource-conserving businesses.
Meta Description: [ Main page, end subsidies for wasting - your tax dollars down the drain. ]
Kick All Agricultural Subsidies (Kick-AAS) - Organization working to abolish all agricultural subsidies in the United States. Argues that agricultural subsidies in industrialized countries harm third-world farmers by denying them the opportunity to compete fairly.
Meta Description: [ kick All Agricultural Subsidies: give poor nations a level playing field.
]
Paying for Pollution - How Taxpayers Subsidize Dangerous and Polluting Energy Programs - Report in PDF and HTML formats on subsidies in the United States for polluting industries: who benefits from these subsidies, why they hurt Americans and the environment, and what should be done instead.
Meta Description: [ Friends of the Earth is dedicated to protecting the planet from environmental degradation; preserving biological, cultural and ethnic diversity of the planet; and empowering
citizens to have an individual voice in decisions affecting the quality
of their environment - and their lives. ]
Physician Behavioral Response to Price Control - Scholarly article detailing a research project studying the response of physicians to price controls. Concludes that price controls are not effective in capping rising health care costs.
Roosevelt's Message to Congress on Price Control - Argument by Franklin D. Roosevelt in 1941 for Congress to pass legislation capping prices to prevent unchecked inflation.
The Advanced Technology Program And Other Corporate Subsidies - Stephen Moore, Director Of Fiscal Policy Studies at the Cato Institute in Washington, DC, outlines the effects of various government subsidies and argues against corporate welfare grants.
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The Washington Times: Agricultural Subsidies Targeted - Article speculating that the World Trade Organization will attack agricultural subsidies in the United States and Europe and discussing the WTO's actions against subsidies in the past.
Time To Condemn Subsidized Housing - An article claiming that subsidized housing causes harm, not good.
Meta Description: [ America's Future is a nonprofit organization dedicated to the preservation of our free enterprise system and our constitutional form of government. ]
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What Price Control Really Means - An article arguing against price controls on the basis that they are economically harmful and impose unnecessary limits on freedom.
Meta Description: [ The history of price control is the history of shortages, queues, and dissatisfied customers ]
WTO: Subsidies and Countervailing Measures - Outlines the World Trade Organization's position on various types of subsidies and measures that can be taken to remove or counter their negative effects.
Meta Description: [ This TRADE TOPICS page will take you to information available on the WTO website, on issues handled by the WTOs councils and committees, and its trade agreements ]
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