Subsidies and Distortions

Suppose that Bill Gates, Warren Buffett, and Larry Ellison pool their wealth into what they call "The Subsidy Fund."  Out of his fund, the three billionaires will subsidize producers of their choice.

Let's imagine that Messrs. Gates, Buffett, and Ellison choose to bestow billions upon Blairex Laboratories, Inc., of Columbus, Indiana.  The three billionaires subsidize Blairex not out of any profit motive but, rather, simply because they want to do so – it makes them feel good.

Blairex...