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  • When Government Picks "Winners," They Sometimes Turn Out to Be Losers

    The government isn’t very good at picking technologies to invest in. Undeterred by this track record, however, some members of Congress now want to create a new subsidy program for cars powered by natural gas. Time to remember two great moments in government technology policy.

    In the early 1960s, an adviser told President Kennedy that failure to enter the supersonic transport market would cost the United States 50,000 jobs, $4 billion in income, and $3 billion in capital. In 1968, the federal government began subsidizing the development of the Boeing 2707—an aircraft that was expected to compete with the French Concorde. Supersonic travel uses a lot more fuel, and spikes in the price of fuel made the project uneconomical. Concorde flights were also so loud that they provoked a backlash against supersonic flight. After spending nearly $1 billion without completing a prototype, the Boeing project was canceled in 1971.

    Flash forward a decade. High gas prices induced Congress to create the Synthetic Fuels Corporation to invest in developing alternatives to imported fossil fuels. This public-private collaboration was eventually killed in 1986, but not after spending $4.5 billion of taxpayers’ money without producing any new fuels. This time falling gas prices foiled the government’s plans, as alternative fuels could not compete against cheap gas. (See “Energy Subsidies,” by Chris Edwards, DownsizingGovernment.org, February 2009.)

    Government can’t predict the price of fuel—or many other factors that determine whether a particular technology will succeed. Maybe compressed natural gas vehicles are the future. But, as Nick Loris points out, if consumers want them, private companies will figure out how to make them without government subsidies. For more on why these subsidies are a bad idea, see Loris’s paper “Natural Gas Vehicle Subsidies Hurt Consumers,” The Heritage Foundation, May 11, 2011.

    Posted in Energy [slideshow_deploy]

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