Subsidies are the last refuge of a failed policy maker?

Ajay Shah has a post on the topic. The summary is:

Many times in India, subsidies are being used to express sheer value judgments; they are just the faddish thinking of one bunch of hausfraus running policy versus another. At other times, a market failure is indeed present. But instead of more subtle interventions and the minimum use of force — based on a sound scientific understanding of the anatomy of the market failure — we tend to rush to the excessive use of force that is a subsidy. Every subsidy is grounded in the monopoly of violence of the State that is required for tax collection. We should be far more circumspect before doling out subsidies. Subsidies are the last refuge of a failed policy maker.

One may disagree with what the author has to say but points have been well argued.

I guess the problem is not subsidies but open ended ones. Some form of subsidies might be needed to get things going in initial years. But they continue to go forever without looking at merits of the case. What is needed instead is a closed end approach to subsidies where after a definite time, they should be phased out.

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