Government subsidies and grants lead to misallocation of resources regularly. This is one of the primary reasons the Austrian School of Economic Thought opposes government support for businesses. Long ago, I was taught Economics isn't about getting rich or achieving a goal. It's about managing process.
"While Austrian economists acknowledge some institutions are helpful to the individual economic process, they tend to view most institutions and regulations as inhibiting individuals from reaching their goals. Therefore, they tend to support a free market and laissez-faire governance. They believe government intervention hinders the process and decision making of market participants, resulting in suboptimal economic conditions."
This author explains why the problem isn't the government, but the entrepreneurs looking for money. I'd say she's incorrect. People are frequently distracted by shiny objects. Government offers of cash are usually rule-bound and inflexible. meaning we alter our decisions to get 'free stuff'. If you told me that you'd pay 1/2 of the price of a car, but I had to buy a $70,000 Tesla (costing me $35,000) as opposed to a $25,000 Mini which I have the cash for, chances are I'm going to scrounge for the extra $10,000 even though I could use that $10,000 to repay a loan or take a vacation. We always tend to try and 'trade up' in the world, and if the incentive seems too good to be true, we'll usually take it. Unfortunately, Sky Masterson's wisdom regarding an offer which is too good to be true:
One of these days in your travels, a guy is going to show you a brand-new deck of cards on which the seal is not yet broken. Then this guy is going to offer to bet you that he can make the jack of spades jump out of this brand-new deck of cards and squirt cider in your ear. But, son, do not accept this bet, because as sure as you stand there, you're going to wind up with an ear full of cider.
Yes, the entrepreneurs should be more thoughtful and careful. It says much about their ability to run a business if they deviate from their business plan for less than optimal reasons. But what does it say about the government that is encouraging them to deviate from the business plan? Sky Masterson likely recognized the government as the biggest con running.
