In Frederic Bastiat’s What Is Seen and What Is Not Seen there is a less known section in which Bastiat addresses government subsidies. He acknowledges the argument that subsidizing the arts creates more art where there would have been less, but then counters with a few points, some of which I will outline here:
“Do the rights of the legislator go so far as to allow him to dip into the wages of the artisan in order to supplement the profits of the artist?”
The first point is that even if the government’s actions would make society better off, that the government still should not do it. This is also illistrated in the “Cut Up Chuck” Case.
Another point goes directly to the heart of the economic matter (That Which is Not Seen):
“Yes, it is, at least in part, to the workers in the theaters that the sixty thousand francs in question will go…
But where does it come from? …And where would they have gone if a legislative vote had not first directed them to the rue de Rivoli and from there to the rue de Grenelle? That is what is not seen.”
When the government subsidizes, it also destroys. What it destroys is always and necessarily more valuable than what it creates. Not only does the government have no incentive to maximize efficiency or social utility, but these subsidizes also result in deadweight loss to the economy. Subsidizes are bad, not only because they are immoral but also because it hurts the economy.
Copyrights are a form of subsidy.