Ȃȃǿ Partʺʺ: Politics and Philosophypeople would otherwise spend themselves on satisfying their wants, by
transferring real resources from the private to the public sector, by creating
or threatening subsidized competition with private approaches, and by
stifling imagination with the thought that the problem in question is
already being taken care of. It is instructive to ponder what the state of
affairs in education, health and retirement programs, housing, transporta-
tion, the mails, and other fields would be today if government had not
gotten so heavily involved as it has in fact. One frequent advantage of
private over government financing is that it can take better account of
how strongly people desire an activity on the whole and in its various pos-
sible forms. Far from the importance of an activity arguing for its being
taken over by the government, one should think that its importance argues
against its being dominated by one big supplier. It is all the more regret-
table when various monopolized activities are monopolized by the same
monopolist and when economic and political power are combined, with
all that implies about potentialities for coercion.
What crowding out means is illustrated in the field of energy. Pro-
posals abound for government action and subsidies to develop non-con-
ventional sources. Taxpayers would in effect have to pay the difference
between the high cost and lower price of subsidized fuels; and they could
not, acting individually, escape this burden by energy conservation. Pro-
duction from conventional sources and potential production from unsub-
sidized new sources will suffer as producers find it easier and less risky to
take government handouts. Not only money but also talent and ingenuity
will be diverted from other types of production, exploration, and research
into those favored by the government. Business firms and investors will
shy away from risky, expensive, long-term-oriented projects not only for
fear of future government-subsidized competition but also for fear of
future infringements on property rights. Ļe history of energy policy,
together with current demogogy, provides ample grounds for the latter
fear: firms and investors must recognize the prospect that even after risk-
ing heavy losses, they will not be allowed to collect exceptionally large
profits from successful hunches and good luck.ȁȃGovernment reassur-
ances, even if made, would nowadays not be credible. Ļis example bears
on a broader point about remote repercussions—remote in time and in sec-
tor affected. A violation of property rights—perhaps restrictions on use of
ȁȃPaul L. Joskow and Robert S. Pindyck develop points like these in “Ļose Subsidized
Energy Schemes” (ȀȈȆȈ, p.Ȁȁ).