Free Markets and Their Occasional Blind Spots

The free market, left to its own devices, is an engine of prosperity and innovation. It rewards efficiency, punishes waste, and, in theory, benefits all participants through voluntary exchange. Yet even the most ardent capitalist must acknowledge that markets are not infallible or omniscient. Markets do not inherently account for long-term national security needs or the threat of monopolistic dominance; they have blind spots for greed-driven cartels and externalities that can harm the public. In certain critical arenas, a judiciously applied subsidy can function not as a distortion, but as a corrective measure to steer the market back toward serving the common good. Such strategic subsidies – those aimed at achieving the maximum good for the maximum number of people – need not violate free-market principles. When designed to enhance competition, ensure broad prosperity, and avoid the “rob Peter to pay Paul” trap of mere wealth redistribution, these interventions can uphold the spirit of the market even as they guide its course.

Consider the global oil market. Nowhere is the tension between free-market purity and pragmatic intervention clearer. In a hypothetical world of perfect competition, producers and consumers would set oil prices through pure supply and demand. Reality is far different. A cartel of nations – OPEC – actively manipulates production to keep prices at an artificial monopoly high. This is not a free market at work; it is a coordinated effort by a few players to gouge consumers and consolidate power. Left entirely to “natural” market forces, crude oil extraction would gravitate to the lowest-cost producers, handing disproportionate power to places like Saudi Arabia, Venezuela, or Russia. Those nations have historically not shared America’s interests, raising the specter of hostile influence over our economy. The free market’s invisible hand, elegant though it is, does not automatically guard against such geopolitical exploitation. It takes deliberate action – yes, sometimes in the form of subsidies or policy support – to counteract a predatory cartel and ensure energy independence for the free world. Rather than “bastardizing” the market, strategic support for domestic oil and gas can enhance competition by preventing a foreign stranglehold on supply. As one economist noted, world oil prices are set not by free-market forces but by a cartel extracting “maximum rents” from buyers like American consumers. A nation that refuses to play this rigged game – by bolstering its own producers – is not betraying free-market ideals, but defending them on behalf of its people.

The Monopoly Threat and the Case for Strategic Subsidies

Free markets do an excellent job optimizing ordinary conditions, but they struggle in the face of monopolies and cartels. When a single entity (or tight-knit group) corners a vital resource, the profit motive drives that monopolist to enrich itself at the expense of everyone else. Without competition’s moderating influence, prices soar and consumers suffer. History and theory both show that as markets veer toward monopoly, the wealthy few get wealthier while the masses grow poorer. Conversely, when competition increases, monopolistic profits shrink and broad prosperity rises. Preventing monopoly is thus not a distortion of the free market – it is a precondition for the free market to function properly. Governments have long recognized this through antitrust laws and other measures. In a similar vein, targeted subsidies or supports can be tools to prevent critical sectors from falling under monopolistic control. The goal is not to supplant the market, but to save the market from itself when it teeters on the edge of dysfunction.

Energy is a prime example. In the electricity sector, a purely laissez-faire approach might see aging but critical power plants shut down simply because today’s spot market deems them unprofitable. But what happens when those plants are the backbone of grid reliability or national security? A prime case is playing out in Ohio. There, a pair of coal-fired power plants from the 1950s – owned by the Ohio Valley Electric Corporation (OVEC) – have become flashpoints in the debate over subsidies. These plants were originally built to supply power for uranium enrichment operations at Piketon, Ohio, a key national security mission during the Cold War. Decades later, their original purpose faded, and cheap fracked gas made them look obsolete by pure market metrics. In a simple free-market ledger, these plants “should” shut down as uneconomic relics. But that ledger does not tally the value of having a massive, always-on power source ready for any future resurgence in domestic uranium enrichment or other strategic needs. It does not compute the geopolitical risk of losing heavy industrial power capacity in an unstable world. This is where policy must step in. Indeed, Ohio lawmakers recently moved to repeal direct subsidies for the OVEC coal plants (a legacy of a 2019 bailout law), even as they enacted new rules to discourage the premature closure of such “base load” plants. House Bill 15, signed by Governor Mike DeWine in mid-2025, forbids settlement deals that would close or curtail base-load power plants. Its proponents argue that keeping these dependable plants running will support Ohio’s growing power needs and promote competition by not letting the grid become overly dependent on a single energy source. In effect, the law aims to prevent a future where the state’s energy fate is left to the whims of a few gas companies or a single type of technology.

There is a valid conservative principle in this approach. By ensuring multiple types of power generation remain in play, the state avoids de facto monopolies in generation fuel. Yes, supporting an old coal plant can be labeled a “subsidy” or market interference – but if the alternative is to cede all leverage to, say, natural gas (with its price volatility and occasional supply failures), then the short-term market “distortion” yields a more genuinely competitive long-term market. A truly free market in energy must sometimes be preserved through active measures, lest it collapse into a fragile single-source system. The Ohio law is not perfect – critics note it defines “base load” only as nonrenewable sources like coal, natural gas, or nuclear, explicitly excluding wind or solar. This asymmetry has led to claims of favoritism. Nonetheless, the principle that reliability and diversity of supply are paramount stands sound. Even the Sierra Club, no friend of coal, once struck a deal in 2015 to keep some coal plants running as a hedge against price spikes (in exchange for future investments in renewables). That kind of compromise, now outlawed by HB 15, underscores the reality that even environmentalists tacitly acknowledge the value of base load power when the chips are down. The new law simply makes that value explicit policy.

To be sure, not all of HB 15’s provisions perfectly align with free-market competition. The law, while keeping big plants online, also prohibits utilities from owning new behind-the-meter generation facilities for customers. This was likely intended to prevent monopoly utilities from crowding out third-party energy providers in the budding market for on-site generation. But in practice it could be seen as the government picking winners – allowing independent developers to build customer-sited power projects, but not allowing utilities to compete in that arena. Such nuances show that crafting good subsidies or regulations is a careful balancing act. The guiding star must be: does this policy maximize competition and the public interest, or merely protect a special interest? A subsidy that broadens the field of competitors (by helping a new technology mature or keeping multiple fuel options viable) can be pro-market. One that narrows the field (by entrenching an incumbent or mandating a single solution) is usually not.

Energy Security as a Public Good

“National security” is often invoked to justify government intervention, sometimes too loosely. But in energy, the connection is direct and concrete. An economy runs on energy; a modern society cannot function without abundant power and fuel. When market forces threaten to undermine the security of supply, conservatives should remember that protecting the nation’s foundational systems is a legitimate role of government. Ensuring energy security is akin to providing for the national defense or a stable currency – it undergirds all other free enterprise. Strategic subsidies in energy can thus be viewed as an insurance policy for the nation.

A clear case is the United States’ support for its domestic oil and gas industry. Critics love to point out the tax advantages and incentives the industry receives, claiming hypocrisy when oil executives extol free markets. Yet these measures have helped vault America to be the world’s top oil and gas producer, reducing our reliance on imports. The benefit accrues not to any single company but to the nation at large: gasoline prices are tempered by the knowledge that U.S. producers can ramp up output when OPEC tries to choke supply. The monopoly pricing power of the OPEC cartel is thus blunted by the competitive production coming from Texas, North Dakota, Pennsylvania and beyond. This is a textbook example of a subsidy (if we must call it that) achieving the “greatest good for the greatest number.” It keeps consumer prices lower than they’d be under a foreign cartel’s thumb, and it prevents adversarial regimes from wielding oil as an economic weapon. Far from “robbing the rich to give to the poor,” it stops the robbing of everyone by a rich cartel. It’s a market correction in libertarian clothing – one might say it empowers consumers and producers to transact freely, without a coercive external influence setting the terms.

Moreover, many of the incentives for oil and gas are structured not as blank checks, but as performance-based benefits. They often encourage exploration, technological innovation (like advanced drilling techniques), or the maintenance of spare capacity that acts as a buffer in emergencies. If structured wisely, such policies align with free-market outcomes: more supply, more innovation, and more competition. They only offend a purist ideology that any government action is bad by definition. But few complained about “big government” when America’s shale boom broke OPEC’s stranglehold in the 2010s. Sometimes, muscular self-reliance at a national scale requires a nudge from policy. The alternative – a laissez-faire surrender – would have left us at the mercy of oil states that do not share our values or interests.

National security also means resilience in the face of disasters or crises. Here again, a purely free market tends to optimize for average conditions and cost, not worst-case scenarios. Take natural gas, a stalwart of free-market efficiency in power generation. Gas plants are cheap to build and often set low market prices for electricity. Yet a cold snap can knock gas supply offline in a way the market might not price in until after the fact. During extreme winter storms in recent years, gas wells and pipelines in the United States literally froze, cutting off fuel to power plants. In the massive Texas blackouts of February 2021, for example, gas production plummeted by 70% in the state at the worst point. No rational market actor wanted that outcome – it was a fluke of weather and inadequate preparation. But it happened, and hundreds of people died in the dark. If a slight “market inefficiency” (say, requirements or subsidies for winterizing infrastructure, or maintaining alternate backup fuel like onsite oil storage) could have averted that catastrophe, would it not be worth it? The wellhead freeze-offs that stop gas flow in extreme cold are well-documented. Ensuring critical facilities like hospitals or military bases have power in those moments might mean paying coal or oil-fired generators to stay online as insurance. It might mean directly supporting a dual-fuel capability or on-site reserve fuel stocks. These are forms of subsidy in a broad sense – extra costs borne for reliability – but they serve the highest utilitarian purpose: keeping citizens safe and the economy intact when nature or adversaries strike. Reliability is a public good that markets alone often undervalue. A conservative who prizes order and security can accept a subsidy that keeps the lights on as firmly within the mandate of good governance.

Good Subsidies vs. Bad Subsidies: The Technology Neutral Approach

If there is one principle that should guide energy policy, it is neutrality in competition. Government should set the goal posts (e.g., reduce emissions, increase reliability, lower costs) and let all technologies compete to meet them. It should not pick winners and losers in advance. The moment politicians anoint a favored technology – be it corn ethanol, Solyndra-style solar, or anything else – they invite inefficiency and corruption. The market is vastly better at sorting out which solutions are cost-effective and scalable. Subsidies, if used, should be temporary and limited, aimed at addressing a specific market failure or jump-starting a nascent field to the point it can stand on its own. The endgame must always be a return to true competition. This is the conservative free-market ethos applied pragmatically: create conditions for all players to have a fair shot, then let the best ideas win.

Recent policy debates have sometimes strayed from this ideal. Consider the push for “all of the above” energy strategies that in practice turn into “all of the subsidies” for certain industries. Nowhere is this more apparent than with wind and solar power. For years, these renewable sources have been propped up by mandates, tax credits, and preferential treatment on the grid. The intention, noble on the surface, is to promote cleaner energy. But a hard look at the results reveals an uncomfortable truth: lavish support for wind and solar has spawned a sprawling, Rube Goldberg-like energy system that is neither particularly clean, nor reliable, nor cheap for consumers. We have subsidized ourselves into a corner – and a handful of special interests have reaped the rewards while the public shoulders the costs.

The federal government’s own rhetoric is telling. In 2025, the Department of the Interior pointedly declared it was “ending preferential treatment for unreliable, subsidy-dependent wind and solar energy.” An Interior press release decried the “regulatory favoritism towards unreliable energy projects that are solely dependent on taxpayer subsidies and foreign-sourced equipment.” This blunt assessment came alongside an executive order terminating certain renewable energy tax credits and tightening restrictions on Chinese-made solar and wind components. Why such harsh language from a government typically diplomatic in tone? Because the evidence had mounted that many big renewable projects were economically unviable without perpetual aid, and worse, that they were compromising grid stability and even marring landscapes for dubious gains. “Unreliable wind and solar energy sources displace affordable, dispatchable energy, compromise America’s electric grid, and denigrate the beauty of our natural landscape,” the White House fact sheet asserted. It further warned that “reliance on so-called ‘green’ subsidies threatens national security” by making the U.S. dependent on foreign-controlled supply chains. These are not arguments concocted by think-tank idealogues, but conclusions drawn from hard experience and data.

Wind and solar were sold as panaceas – free fuel from the breeze and sun, how could we go wrong? But the devil is in the details, and in this case the details form a devilish litany of trade-offs. For one, intermittent sources like wind and solar inherently undermine grid reliability. They only produce power when nature cooperates: wind turbines yield nothing on a still day; solar panels are idle after sunset. The result is that a grid with a large share of renewables must be augmented with layers of backup and storage to deliver steady power. Each megawatt of wind or solar capacity must be effectively paired with a megawatt of fossil-fueled or other dispatchable capacity ready to fire up when the renewables ebb. As energy policy analyst Paul Driessen quipped, “Every megawatt of solar power must be backed up by coal or natural gas generators. Otherwise we have electricity when it happens to be available, instead of when we need it.”. This reality forces conventional power plants into inefficient stop-start operations – they idle in spinning reserve (burning fuel for no output) and then ramp up and down to fill renewable gaps, slashing their efficiency and driving up fuel use and emissions. In other words, adding lots of renewables can increase the consumption of fossil fuels in practice, a perverse outcome that advocates prefer to ignore. Indeed, studies have found that as solar capacity has grown, the net effect can be greater cycling of coal and gas plants, sometimes offsetting the intended carbon savings.

Furthermore, renewables impose a huge footprint on land and resources for comparatively meager energy return. A modern 600 MW coal or nuclear plant sits on a few hundred acres and runs at 90%+ capacity factor; it reliably produces over 500 MW almost around the clock. By contrast, to get even a fraction of that output from solar requires vast swaths of land. In North Carolina, one proposed solar farm covering 600 acres (nearly a square mile) would deliver a theoretical 74 MW, but in reality – given average sunshine – only about 20% of that on an annual basis. That comes out to roughly 33 acres of panels per megawatt of actual output. Wind is similarly land-hungry. The environmental toll of such sprawling developments is far from benign. Forests, farms, and habitats are disturbed or destroyed to make room for solar arrays and wind installations. Local communities often get little benefit – maybe a bit of tax revenue or a few lease payments – while they watch their once-scenic vistas filled with industrial hardware. In the North Carolina case, wildlife habitat and farmland would be replaced with glass and metal, and neighbors left with a blighted landscape. All this, to serve distant power markets and green corporate agendas.

Even on the economic front, the promise of “cheap” renewable energy frequently rings hollow. Yes, the marginal cost of sunlight and wind is zero, but the system costs and reliability costs are significant. States that have aggressively pushed renewables through mandates and subsidies have seen electricity rates climb toward European levels. North Carolina and Virginia consumers pay around 9 cents per kWh today, but as more intermittent generation is forced onto the grid, they risk catching up to the 16–18 cents per kWh burden shouldered in “green energy” states like Connecticut, New York, and California. Those higher costs hit manufacturing competitiveness and household budgets alike. It’s the most vulnerable – poor and minority families – who suffer first when electric bills soar. So much for the moral high ground of the renewables lobby; their policies can be deeply regressive, amounting to a transfer of wealth to subsidized investors and equipment makers, often in foreign countries, while working-class Americans pay more for an inferior service.

And what of the touted environmental benefits that supposedly justify all this? They often prove illusory. Wind and solar advocates love to claim their products produce no pollution and will stabilize the climate. But aside from the aforementioned cycling emissions and increased need for backup plants, there are direct impacts: wind turbines slaughter birds and bats by the thousands; solar farms, as one ecologist put it, “essentially create a dead zone under and around them” where few species can thrive. The manufacturing of panels and turbines is energy-intensive and involves mining of rare earth metals, often in countries with poor environmental controls. Even after their 20-25 year lifespan, disposal and recycling of huge turbine blades and toxic solar panels is a mounting concern. Landfills are already receiving tons of decommissioned renewable hardware that is difficult to recycle. In short, the “green” image is a carefully crafted mirage – much like the gigantic contraption of interconnected parts required to keep a renewables-heavy grid from collapsing, it is more complex and costly than advertised, and the benefits are murky at best.

It is no wonder, then, that the recent conservative shift in tone calls some of these projects what they are: boondoggles. President Trump’s energy team bluntly labeled the zeal for wind and solar a “Green New Scam”, arguing that blindly subsidizing these unreliable sources was endangering the nation’s energy future. The proper course is to level the playing field – remove the crutches for renewables, and also remove obstacles for reliable energy sources. Let natural gas, coal, nuclear, hydropower, geothermal, and renewables truly compete on their merits, accounting for capacity factors and reliability. If reducing carbon emissions is a consensus goal, then price carbon broadly (as a true market mechanism) or set emission performance standards – but don’t hand out billions in tax credits only to wind and solar while ignoring nuclear (which provides carbon-free baseload) or gas innovations (like carbon capture). Picking one technology not only offends fairness, it often fails. The better path is outcome-based: reward the result (cleaner energy, dependable supply) and let the market figure out the best mix to deliver it. That might mean advanced nuclear reactors and grid-scale storage win out; or maybe carbon-captured gas; perhaps improved renewables with real storage; maybe something not yet on the horizon. A government that truly believes in the free market trusts innovation and refrains from central planning of technology winners.

Toward a Robust, Competitive Energy Future

The conversation about subsidies is really a conversation about what kind of future we want. Do we want an America where policy is rigidly hands-off even if that means sleepwalking into strategic vulnerabilities – a world where the cheapest short-term option always wins, even at the cost of resilience and national strength? Or do we seek a future where free enterprise is harnessed and guided to also meet the broader needs of society – where the market’s dynamism is preserved, but its rough edges are smoothened by prudent policy? A conservative, free-market position need not equate to dogmatic opposition to any government role. Rather, it should demand that every intervention pass a high bar: serving the national interest, expanding opportunity, and respecting the primacy of private innovation.

Not all subsidies are created equal. The bad ones – and there are plenty – breed dependence, reward inefficiency, and enrich narrow interests at the expense of the public. The good ones are catalysts: they stimulate improvements, prevent worse outcomes, and then gracefully step aside as the market takes over. One of history’s ironies is that even Ayn Rand, that great apostle of unfettered capitalism, lived in a nation that thrived thanks in part to strategic government investments (from railroads to the internet). Of course, Rand would remind us that it was ultimately the individual minds and entrepreneurs who made America great – and she’d be right. The task for policymakers is to ensure those minds have the freedom to excel, which sometimes means giving them a boost against unfair obstacles (like foreign cartels or misguided regulations) and sometimes means simply getting out of the way.

In practical terms, this philosophy translates to a few guiding tenets for energy policy: security, competition, and accountability. Support those projects and industries that fortify America’s energy security and economic independence – whether that’s domestic drilling, advanced nuclear, or robust pipelines – because that benefits everybody. Insist that any subsidized effort be structured to enhance competition, not stifle it: phase-out schedules, matching private investment, and broad eligibility can help. And maintain accountability by measuring outcomes: if a subsidy isn’t delivering the promised public benefit, reform or end it. For example, if an oil tax incentive no longer serves a security purpose because the market has shifted, have the courage to repeal it. If a renewable mandate is hiking bills without environmental gain, rethink it. The market feedback loop should inform policy adjustments continually.

It is heartening that Ohio’s latest energy law, HB 15, nods toward some of these principles. It repeals previous market-distorting subsidies (like those for two old coal plants, finally lifting a burden off ratepayers), lowers taxes on new power generation investment to encourage fresh capacity, and while it loosens restrictions on behind-the-meter generation so that large consumers can deploy their own power sources and even share microgrids among neighboring facilities - it prohibits the companies best suited to make these from participating (Electric Utilities and Electric Distribution Utilities).

These moves are fundamentally pro-market: they reduce artificial costs and empower more players to participate in energy supply. At the same time, HB 15’s bar on certain settlement deals sends a clear signal that pandering to short-term interests at the expense of long-term reliability will no longer be tolerated. No more sneaky deals to shutter a power plant early just because a special interest group prefers it, not unless the public interest is openly considered. One can quibble with details – and indeed, lawmakers should refine any provision that inadvertently limits healthy competition (such as the aforementioned utility BTM ownership issue prohibiting EUs and EDUs). But the trajectory is right: assert the public’s interest in a stable, abundant energy supply, while unleashing private enterprise to meet that demand in innovative ways.

In the final analysis, a subsidy that serves freedom is no sin. When American oil fields gushed to break a foreign oil monopoly, that was a victory for freedom. When aging coal plants are kept online just long enough to bridge the gap to new nuclear reactors – ensuring that we’re never one pipeline freeze or one geopolitical crisis away from blackouts – that is an investment in freedom. Conversely, when billions are spent on ornate contraptions of windmills and solar panels that cannot deliver power on a calm night, that is indeed a scam perpetrated on the public. It enriches a few while the many pay more for a flakier grid. Free-market conservatives should not shy away from making these distinctions loudly and clearly. We do not oppose subsidies because a spreadsheet says so; we oppose bad subsidies because they corrode the ethical and practical foundations of our prosperity. And we champion good subsidies – reluctantly, carefully, temporarily – when they reinforce those foundations against genuine threats.

The invisible hand of the market has lifted humanity to heights of wealth and comfort once unimaginable. We tamper with it at our peril. But as any good sailor knows, even the surest ship sometimes needs a course correction against a strong gale. Think of strategic subsidies as the rudder adjustments that keep our ship of state on course toward widespread prosperity and security. They are justified only insofar as they benefit all hands on deck and not a select few. They must always aim to return the ship to smooth waters where the engines of capitalism can resume full speed. In that spirit, conservatives can proudly argue that not all subsidies are abhorrent. Some are the price we pay for remaining a free and thriving nation, unbowed by either billionaire monopolists or bureaucratic meddlers, charting a destiny that maximizes liberty and well-being for the greatest number of our people.

In sum, the market should be our default driver, but we hold the map. And if a timely nudge here or there prevents a crash or conquers a storm, that nudge is not a betrayal of principle – it is the highest fulfillment of our responsibility to ensure that the market ultimately delivers on its promise of the greatest good for the greatest number.

By Jon Morrow - a Free-Market Economist that focuses on Energy and Currency Issues