The PJ Tatler

Subsidized Stupid

I snickered at this headline prior to recalling that each one of these (coal-powered) cars produced has been made at a tremendous loss, with the taxpayer picking up the fail in subsidies previously given. So, not so funny:

So, how are the first two plug-in mainstream vehicles in the U.S. selling? Both the Chevrolet Volt and the Nissan Leaf had their first deliveries in December, which means that January 2011 was the first full month of sales for each. The numbers are:

  • Volt: 321 (plus 326 in December, for a total of 647)
  • Leaf: 87 (plus 19 in December, 106 total)

This isn’t a matter of masters-level economic analysis. Basic supply and demand reality, evident to most of our nation’s proprietors of lemonade stands, should have prevented a single one of these cars from being produced. If the product costs more than the value the product provides to the consumer, the firm should not produce the product.

How did this get by a single executive? How, Krugman, how?

Ah, right. Subsidies. If the government is willing to pay for a product, that’s no different to the firm’s bottom line than if a consumer paid for it.