There are many rational reasons why the government should invest in emerging markets especially when their products have tangible public health benefits. Some people argue we shouldn’t invest public dollars in electric charging infrastructure – that the private sector should take care of it- like with gas stations.
Here’s a summary of how gas stations and electric charging are different from the dispassionate point of view of an economist: former AzPHA Board member Dr. Matt McCullough:
- Gas stations are a mature market while electric charging stations are a very new/emerging market. Government involvement in new or emerging markets is far more common—and economically rational—than government involvement in mature markets.
- A first-mover disadvantage exists where consumers shy away from EVs due to “range anxiety” since relatively few EV charging stations exist. This leads to a smaller EV market share, which leads to fewer EV charging stations being built. Which leads to more “range anxiety.” Basically, if you don’t build it, they won’t come.
- EV charging stations face a first mover disadvantage (nobody has much incentive to build the first EV charging station but once others exist the incentive changes/grows). This means that we should not necessarily expect the private market alone to quickly create a robust charging network.
- Compared to electric-powered vehicles, gasoline-powered vehicles impose much different societal costs in terms of externalities. When there are externalities—meaning the full costs of consumption of a product are not borne by the producer/consumer—there is some rationale for government involvement in the market. This is especially true when the mature market has externalities that the emerging market can help reduce.
- Simple market forces won’t necessarily produce a coordinated network of charging stations. The tragedy of the commons suggests that while overall EV producers (and society) will recognize the value of a robust, coordinated network of chargers, there’s little incentive for any one EV company to build this on their own. It makes more sense for any given company to sit on the sidelines while the other companies pay for things.
