Although many people, from economists to environmentalists, oppose ethanol subsidies on grounds that it is inefficient and harms the environment, politician Mitt Romney once said, "I support the subsidy of ethanol. I believe it's an important part of our energy solution in this country." Why does Mr. Romney support ethanol subsidies?
I. Most of the people harmed by the subsidies are rationally ignorant and thus don't oppose the policy.
II. The benefits of the subsidy are concentrated among a group of producers who provide political and financial support to politicians who support the subsidies.
III. Mr. Romney's support of ethanol subsidies is not only in his self-interest but also in the public's interest.

Question

Quizplus · Accepted Answer

I and II are both accurate reasons for Mr. Romney's support of ethanol subsidies. Reason I suggests that the harm caused by the subsidies is diffuse, meaning it is spread out among many individuals who are not necessarily aware of the true cost of the policy. Reason II indicates that the benefits of the subsidy are concentrated, meaning they are enjoyed by a specific group of producers who have a vested interest in lobbying politicians to continue providing support for the program. Reason III is not necessarily accurate, as there is significant debate over whether the public benefits from ethanol subsidies or not.

Although Many People, from Economists to Environmentalists, Oppose Ethanol Subsidies