The unobservable counterfactual

Actions have consequences. Sometimes those consequences appear in plain sight: level the playing field by having polluters pay for their own pollution, and you'll see less pollution. Works every time.

Often, these consequences are hidden. Pick winners, and you'll distort markets. That has been the case ever since fossil fuels started receiving enormous direct and indirect subsidies. Fossils still beat renewables in terms of government support, but that doesn't mean renewables don't experience similarly unintended consequences.

There are some very good reasons why new industries with lots of learning-by-doing still to be done deserve public support. Entrepreneurs don't consider that their doing will create learned shoulders for others to stand on. That's a positive spillover deserving of direct subsidies.

We also need to be clear, though, that there are some unintended consequences of that support. It doesn't take many conversations in Silicon Valley to find a venture capitalist who will tell you that he or she isn't investing in a particular industry precisely because government is supporting it.

We'll never know the true extent of that hesitation, but at least we should be aware of its existence. It's a known unknown, after all.