Tesla is not only a beautiful vehicle,
it creates value for consumers.
It's also a beautiful illustration of the
problem of favoritism in crony capitalism.
And the problem here is that for every bit
of value that Tesla manages to create for
consumers, it creates an enormous amount of
value for politicians by hiding costs.
No one really knows what the true cost of
a Tesla is.
And the reason is that when you add up all
the privileges, all the costs are, uh, they
they get much more difficult to see.
And sometimes there's very nuanced costs here.
So, when you purchase a Tesla, you pay $70,000.
You may pay $140,000.
But that's your portion of the cost.
Another portion of the cost, however,
is sloughed off onto others.
This includes direct loans from the Department
of Energy, which a few years ago amounted
to about about $500 million.
These include tax credits that purchasers
of Tesla are able to obtain, $7,500 against
their tax liability for every zero-emission
vehicle that they purchase.
And these also include state laws.
Several states offer their own set of tax
privileges and they also include, uh, zero-emissions
credit programs, like California's.
It even goes down to, you know, the most minute
level.
If you are parking at a airport in California,
there are special parking spots that are set
aside just for you, if you are driving a zero-emissions vehicle, like a Tesla.
The law is well-intentioned.
Policy makers are trying to counter what economists
call a negative externality problem.
If I, uh, purchase a gas-guzzling car and
it produces all sorts of nasty, uh, effluence
that come out of the tailpipe, then I'm imposing
costs on others.
And I am, by failing to internalize those
costs and take, uh, account of them, I will
drive more and purchase nastier, dirtier cars
more than would be socially efficient.
The idea is to try to figure out how, how
we can encourage, uh, people to buy, uh, vehicles
that are more environmentally friendly.
Any activity that you subsidize, you get more
of.
When the federal government transfers consumers'
or taxpayer dollars to a particular industry,
that, you're gonna get more of whatever
that industry is doing.
In this case, you know, Tesla is a leader
in, in technology.
So at first, you know, you look at this and
you say, "Well, clearly they are promoting
some sort of new and innovative technology."
But, when you study, um, across industries,
across firms, and you look at those that are
favored, versus those that are not, Tesla's
really an exception to the rule.
Typically, a favored industry or a favored
firm is not an innovative firm.
It's not a firm that's gonna challenge the
status quo.
They tend to ignore consumers and they tend
to think about, not how they can create value
for consumers, but how they can create value
for politicians.
All of these privilege-seeking behaviors are
expensive.
They are hidden costs of privilege that distort
the economy, distort the incentives of both
policymakers and people in business.
