The ethical argument behind government subsidies is that they should be put into place to help industries that will, in turn, help the environment or society. The argument arises from a free market approach, in which the government should not intervene in capital affairs, but at the same time, it's beneficial from a triple bottom line perspective to subsidize companies that can do public good.

Government Subsidies

A government subsidy is a form of financial aid or support given to a sector, industry or organization with the aim of promoting social policy and social good.

A good example of a government subsidy is the $7,500 federal tax credit given to owners of electric cars, or the financial aid given to electric car manufacturers, such as Tesla Motors (TSLA). In addition, clean technology companies such as Solar City (SCTY) have also been beneficiaries of government subsidies.

The aim with clean technology subsidies is to help with the high entry cost and high operating cost to start a clean tech company, with the idea that these companies will do a lot of social good once they can develop sustainable products ready for the mass market.

Ethical Arguments Behind Government Subsidies

The argument arises from the ideology that the government should not intervene in free market economies. Pure competition, many economists say, is the driver behind innovation. If there is enough competition in the electric car sector, for example, it should help develop products with social good and get them ready for market.
The other side of the argument is that companies that can help society and the environment should be rewarded for their work and helped with costs so that they can bring their products to market more quickly.

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