Building Utopia

Current Payment Models

When we live our lives and do whatever we like to do, we invariably have needs and wants, and we would like them to be satisfied. There are social systems and private businesses that satisfy different kinds of needs and wants. In order to satisfy most needs and wants, there is a cost incurred, and this cost needs to be paid by someone. "Payment Models" answer the dual questions of "Who pays for it? And how much?". There are also "Payment Systems" that deal with the actual aspect of transferring money from some account to some other account. These payment systems work with "accounting systems" that keep track of accounts and what is in each of those accounts. This chapter discusses the current payment models and payment systems and the issues associated with them.

The section, "Models and Their Variations", introduces the payment models. The models are:

  • Free Payment Model
  • Token Charge
  • Full Price Payment Model
  • Full Price but Paid by Credit
  • Full Price but Paid by Insurance
  • Full Price but Subsidized and Rationed
  • Full Price Plus Dissuasive Charge
  • Full Price Minus Incentivizing Rebate

There is a section for each of these models, and in it, we will describe the model and point out the issues with it.

There is a wide gap between the free and full price payment models in whether they satisfy the needs and the cost of satisfying those needs. Up until now, various parties in the society have been attempting to fill this gap using the token charge, insurance, credit, subsidies and rations and incentivizing rebate kind of variations. All these payment models and systems have issues and flaws. Society also attempts to reduce hardship for the very poor by providing financial assistance, however, such payments are seldom enough and there is no guarantee that the money thus paid out will be used for needs.

The reason why these models and systems have issues and flaws is that these variations, when first originated more than several decades ago, were practical to implement with the then existing technology.

We could think of improving these payment systems and models. But it is like trying to fix a broken car when we really want an airplane.

From the perspective of our current societies, these payment models and payment systems need to be replaced with something much better. The much better payment model is the Utopian Payment Model, and the next few chapters discuss it.

Models and Their Variations

Currently, we have two major payment models that are used in most cases, and they are "Free" and "Full Price". There are variations of these two models.

There is one important variation of the Free model, and it is called "Token Charge".

Following are the basic variations of the Full Price Payment Model: "Full Price but paid by Credit", "Full Price but paid by Insurance" and "Full Price but Subsidized and Rationed". In addition to these basic variations in payment models, society also imposes a subjective judgment on whether buying a product or service is bad or good and either levies a dissuasive charge or provides an incentivizing rebate, giving us two additional variations of the full price payment model: "Full Price Plus Dissuasive Charge" and "Full Price Minus Incentivizing Rebate".

While these payment models answer, "Who pays for it? And how much?", the actual payment mechanisms or systems that get involved in these various payment models are as follows:

  • Cash
  • Cheque
  • Electronic forms of money transfer - sometimes referred to as wire transfer
  • Debit card
  • Credit cards
  • Insurance card
  • Standard warranty card and extended warranty card

In this chapter, we will focus on payment models, but it is important to distinguish them from the payment systems. Sometimes these get intertwined and make drawing a line between them challenging. We also have to keep in mind that behind every payment system there is an accounting system.

Payment models are far more important than payment systems and their underlying accounting systems. When we are faced with a specific kind of payment need and knowing all possible options that can be used for that payment need, we could list all the reasons why a certain payment model should be used for the payment need. We could also discuss the reasons why a certain other payment model should not be used for that specific payment need. Thus, we can compare and contrast all those models and that specific payment need and evaluate which of those options is most appropriate for that specific payment need. We can focus on just the payment aspects and in that context raise and answer the important question of "why should we choose a specific payment model for a specific payment need?".

When thinking about designing a much better society, an ideal society, a Utopia, we will be thinking about the following related questions:

  • Who pays for it? And how much? This deals with the payment model of the system.
  • How can we make the system better? This deals with an actual social system or an actual business.
  • How does the actual mechanism of the payment work? This deals with the payment system and its underlying accounting system.

We must take care to keep these separate concerns separate.

Free Payment Model

There are many social services for which society does not charge the user of that service at the time the service is availed or enjoyed. In fact, there is no explicit payment whatsoever. This is the "Free" payment model. It is not just society that gives things for free, even corporations do it. The free payment model can also be called "zero cost" or "free of charge" payment model.

The first illustrative example of the free payment model is when we visit a neighborhood park. When we visit, there is no expectation from us that we will pay something for that visit. There is no person or machine for collecting such payments. We have built such neighborhood parks for any person to enjoy it. Our general expectation is that people should enjoy such neighborhood parks when there is natural light outside. Our other general expectation is that people should not be in such parks at night and hence we stipulate that the park should not be used between some hours at night (for example midnight to 4 o'clock in the morning). The reason this kind of service is free of charge is that society does not want to bother with collecting money for each and every individual's use of the common property each and every time it is used. If society were to account for the right price that a person should pay for each and every visit, then even demanding such payment may defeat the purpose of having such neighborhood parks. Hence, society says that we will collect taxes and pay for the creation and maintenance of such parks, and we will not recover the cost of such activities from the individual uses of the common property.

The second illustrative example of the free payment model is when we mandate that babies and children must get certain kinds of vaccines at a certain age in their life. In this case, the society requires all children to get vaccinated so that they have a better immunity to the diseases that the vaccine is trying to prevent. The second reason for the vaccination is to ensure that because we vaccinated all children, the disease causing germ cannot flourish in humans and hence cannot get transmitted from one human to another; thereby reducing the probability of infecting humans by natural human contact during natural social interactions. The reason this kind of service is free of charge is that society mandates vaccinations, and hence society is more than willing to pay for them. This is because if there is a parent who does not have money to pay for and get one's children vaccinated, then this unvaccinated child can put other children at risk. We as a society do not want lack of money to be a reason to put humans at risk. In particular, we do not want one person's lack of money to be a reason for some other person to be put at risk.

The third illustrative example is from a kind of corporation. There are some coffee shops that provide water to anyone who walks in and asks for it. They give the water in the same kind of container in which they would provide chilled caffeinated drinks. They give it without charging anything for it. It is like they are giving away a product for free. The reason they do that is: not doing so may mean that they lose some kind of goodwill from their existing customers or from future customers. The cost to them is very little, and they are of the opinion that it is part of being a "socially conscious and helpful" corporation. The idea is that water should be available for everyone and should not be charged.

Even when the actual user of the product or service does not pay for it, there is always a cost associated with providing a product or a service. The provider of the product or service chooses not to charge for the product or service, because there are benefits of doing that. When society provides such a free service, we all pay for the cost of the service by collecting taxes from all citizens. When a corporation provides such a free product or service, it recovers the cost of providing such a service by increasing the prices of other products and services that they provide.

Those things that are considered collectively owned by society, society pays for it by collecting taxes. These are either physical infrastructure items like roads, bridges, dams, military equipment, etc. or social infrastructure items like law and order, fire fighting, etc. Such things and services are available for free. Those things that society mandates of citizens (like vaccines) are also mostly made available for free. Most of the things that society does, it does to either enable some activity in the society or mitigate some risk that the society faces. Society does not do these to explicitly satisfy the needs and wants of individuals. Society does it to satisfy the needs of the entire society. An individual is expected to satisfy his or her own needs.

The main problem with giving things and services for free is the issue of wastage. Wastage is usually of two kinds. The first kind of wastage occurs due to mismanagement. Wastage due to mismanagement is not just associated with the things society does with tax money. Private corporations are equally prone to such wastage. When a private corporation indulges in too much mismanagement and wastage, they eventually have to declare bankruptcy. When society indulges in mismanagement and wastage, society can just collect more taxes. The problem of wastage due to mismanagement can be reduced in its severity by education. The second kind is wastage occurs because the users of the free things or services use it wastefully only because it is free, only because it costs them nothing. In order to dissuade people from being wasteful, society asks the user of such a service to pay what is called a token charge. When the concept of token charge was initially formed, it made the most sense because it was easily implementable using the then existing technology.

Token Charge

There are cases when society provides a service and asks that the person who avails this service pays a "Token Charge". The amount that is required to pay is fixed for every person who avails the service, and this amount is not sufficient to cover the cost of providing such a service and all the infrastructure that is required to support that service. A large part of the costs are covered through taxes. This is a variation of the free payment model. Instead of the service being free, it has a small token charge. Some of the illustrative examples of a token charge are the amount we pay to obtain our driver's license, state issued identification card and the passport issued by a country.

The main reason that these kinds of services are not free is to dissuade people from wastefully utilizing the service. It is possible that if the driver's license or the identification card or the passport is given for free, then people may be careless and misplace them and ask for a replacement. This asking for a replacement may easily occur over and over again. When one needs to pay for something, one is extra careful with those things and waste and misuse tends to be minimal.

We can easily dissuade people from wasting resources by simply charging the full cost. Then why do we charge just a token charge? The reason we ask for just a token charge rather than the full cost is that if society were to charge the full cost, then poor people will find that charge too much. The things that society does should be for the benefit of all and if society starts charging the full cost and if that means that poor people cannot have access to the benefit, then it defeats the whole purpose of asking society to do it for the citizens.

A practical reason for a token charge is that when providing these things and services, society is unable to fully account for the underlying costs and hence does not know what the "full price" should be. This is because these kinds of services are related to information systems that record identification of people and things (like cars, houses, etc.) and of privileges available to citizens (like driving privilege). Citizens need these kinds of cards to identify themselves (using passport or state issued ID) or identify themselves as owners of some other things (like cars, houses, etc.). In addition to citizens, law enforcement people need information about who has what kind of identification and who has what kind of privileges (like driving privilege). There is no easy way of splitting the cost of maintaining the information systems between the citizens and the law enforcement people.

If these kinds of services were offered by some business, then they would find ways of determining its cost and make sure that those who avail it pay for it in amounts that are profitable for that business. Since society is the sole provider of services like issuing driver's licenses, identification cards and passports, it can choose to ask for the payment of a token charge, because it can recover whatever it really costs from taxes.

The concept of token charge is only suitable for infrequently used things and services. So we have token charges for things like obtaining passports, driver's license, visits to national parks, visits to regional parks, visits to national monuments and many other such things. Imagine if there were no token charge for visiting a national park, then all nearby residents will frequently visit it and the national parks will be overcrowded with people from nearby places making the national park lose its appeal for the rest of the nation. The absence of a token charge will turn the national park into just a local park, defeating the purpose of reserving a large area of land and calling it a national park.

The concept of token charge is totally inappropriate for frequently used things and services during our routine life. Imagine if there was a token charge every time we walked on a sidewalk or visited a neighborhood park or drove our car on city roads. These are activities that people undertake frequently, and token charges for such things are distasteful and a nuisance. After all, we are asking society to do something that is required to be done for the common use and benefit of society, and we pay taxes to accomplish those things. If we then keep asking for token charges for those things that are already supposed to be paid for by taxes, then those token charges become a nuisance. Moreover, the use of such frequently used things and services can hardly be classified as wasteful. For example, if a person decided to lead a healthier life and goes for a walk every evening on the sidewalks, is it wasteful? Far from this act being wasteful, it is the intended use of the sidewalk. Most of the things and services that are used frequently during our routine life can hardly be called wasteful. Which also means that they should be free.

There is one major problem with the token charge. When we ask everyone to pay the same token charge, we are providing the service to a rich person at a low price when such a person does not need such assistance. The point of being rich is to be able to afford such things. The point of being rich is to not need society to subsidize such things. So while rich people get these things subsidized, everyone pays taxes to support such subsidies. Further, while a rich person may find the token charge as trivial, a really poor person may still find the token charge a bit excessive.

Full Price Payment Model

The full price payment model is the most frequently occurring payment model. Most of what we buy from various corporations is priced such that it recovers all the costs associated with providing that product or service and some more for the purpose of profit. We usually pay the full price that is being asked by the corporation. Even when we think we are paying a discounted price and if the corporation is profitable, then we are ultimately paying a price that covers more than all the costs associated with the product or service.

A corporation is primarily intended to serve the owners of the corporation by making a profit on their operations so that the owners of the corporation benefit from the profit. In order to make such a profit, the corporation must charge more than its costs. If the society attempts to eliminate the profit motive from a corporation by banning profit, then from the perspective of the owners of the corporation there is no purpose in having that corporation, managing its operations and creating products and services, as doing all that provides no benefit to the owners of the corporation.

From our perspective, our first benefit when we purchase such products and services from for-profit corporations at full price is that we actually get someone to create such products and services and offer them to us so that we do not have to create them ourselves. Our second benefit when we allow corporations to pursue a profit motive is that we get competition. Many corporations are interested in creating similar products and services and this competition drives invention, innovation and efficiency. As long as the competition is fair, this competition is instrumental in keeping the amount of profit within acceptable norms. We do not object to the profit motive because we also derive benefits from it. Of course, we do not object to the profit motive as long as the profit extracted from the operation of such a business is not significantly above the social norms. When buying something from a corporation, because the profit motive is a valid motive, usually there is no expectation that the corporation provides the product or service for free or for a price lower than the cost of producing it. People buy the products and services that they can afford. People cannot buy those products and services for which they have insufficient money.

Society attempts to regulate such corporations so that they create the products and services that meet certain standards and the methods employed in doing so are not harmful to the environment and follow generally accepted ethical standards. However, all these regulations do not attempt and cannot attempt to take away the profit motive.

Those things that are considered as requiring invention, innovation, specialized knowledge, personal motivation to deliver or just plain and simple work are privately created and offered at full price. These include high-tech and high-skill items, as well as low-tech and low-skill items. Most of the needs and wants are satisfied by activities that are charged at full price.

However, we have a significantly unequal distribution of wealth and that creates hardships for many people. The full price payment model does not address any of those concerns. Hence, over time, we have developed some variations of the full price payment models that attempt to address some of these hardships - though not satisfactorily.

Full Price but Paid by Credit

We have things called credit cards, and we could buy things using them and when we do so, we do not have to immediately pay off what we purchase, we pay for it later and if we pay too late, then we also have to pay an interest charge over and above what we should have paid. People somehow feel compelled to pay using credit cards, and there are many reasons for this. People may choose to use a credit card for a combination of the following reasons:

  • They seem convenient as it means one does not have to carry cash in anticipation of a possible opportunity of purchase or a need for purchase.
  • They seem safer as it means that we do not have to carry cash with us.
  • They seem safer as it means that we do not have to use our "debit card" or "cheque book" and expose our bank account to potential fraud.
  • Some retailers may refuse to accept other means of payment, like cash or cheques.
  • Some credit card providers entice people to use the cards by giving them a percentage "discount" on their spending. Usually this "discount" is no more than 5%.

It may appear that a credit card enables someone with insufficient money to buy something, but the buyer still pays the full price, as eventually the credit card debt has to be paid. This is the "Full Price but paid by Credit" variation of full price payment model.

There are three ways in which those providing credit cards and hence credit make profit. First is by charging an annual fee for having the credit card. The second is by charging the retailer who accepts the credit card a small percentage of the transaction amount. Third is by charging people who do not make their payment on time. When people are late in paying, then credit givers charge interest on the total amount of the money borrowed on credit at high interest rates. These interest rates can be easily more than 15%.

When we pay an annual fee, we are essentially paying for the credit card payment system. When a retailer gets charged for accepting money through a credit card, that retailer has to raise the prices to offset the additional cost and that cost is passed to the users of the credit card and hence in effect the credit card holder is paying for the credit card payment system. When people, for whatever reason, use the credit card to buy things well beyond their financial means, then invariably they cannot make the payments on time and hence incur interest charges. These interest charges contribute primarily to the profits of businesses offering credit cards and credit.

Thus, the consumers are paying for the credit card payment system and the profits of those offering the payment system and ourselves incurring costs. These costs are more than what they would have been if we had just used cash. By buying products and services, we allow providers of such services the opportunity to earn a profit. By allowing a payment facilitator like a credit card organization, we are allowing a payment facilitator to profit from our need or desire to purchase something that we eventually pay the payment facilitator in the form of money.

Money is a social construct and setting up appropriate infrastructure to exchange money in return for products and services is really the responsibility of the society because such a system is for the common good. Cash is the physical form of money, and society already bears the full cost of setting up infrastructure to produce such cash and make it available to people in physical form only in quantities that are consistent with their wealth. That is, one cannot withdraw cash in excess of the amount in our account and when we withdraw cash the amount in our account is reduced by the exact amount of cash we withdraw.

Because of all the extra costs associated with a credit card, when people use credit cards to buy things instead of using cash, they are in effect paying more than what they would have if cash was the only means of paying. Because so many people use credit cards, retailers are not inclined to charge less to those people who are willing to pay in cash. We bear this extra cost even when we do not need the credit!

Full Price but Paid by Insurance

The concept of "Insurance" is very old - centuries old. People purchase insurance by paying a "premium" to cover the financial costs associated with specific "undesirable events" that they desire to insure against. The events covered by insurance are usually low probability events, but if they happen, they cost a lot. In more recent times, insurance companies have begun offering insurance coverage for not-so-low probability and low financial impact events as well. Some examples of insurance are: life insurance, house insurance, car insurance, health insurance, etc. When we buy extended coverage for our car, our TV, or any such appliance or device, we are essentially buying insurance.

The buyers of insurance are trying to protect themselves against the high costs of unlikely events. Buyers of insurance can choose to buy an insurance policy with lower coverage, and then it costs the buyers less in terms of premium. Buyers of insurance can also agree to a "deductible" (the first part of the entire cost required to cover the unlikely event) that is not covered, and in return can obtain lower premiums. If the buyer of insurance chooses a lower coverage or higher deductible, then he or she is choosing to continue to accept some part of the risk associated with the low probability event.

The seller of insurance may operate for-profit or may operate to just offer the service with a not-for-profit attitude. The seller charges a "premium" and uses these collected premiums to cover the costs for those individuals for whom the unlikely event materializes. The sellers of insurance decide the premiums based on their knowledge of how likely the event is, how much of the cost they are promising to cover, the amount of deductibles, their own operating costs and their desire to earn a profit from the operations of the insurance business. Since the sellers provide insurance coverage from the amounts collected as premiums, there is a maximum limit to how much expense can be covered because the amount of money collected as premiums is limited. Insurance covers only the actual or insured financial loss suffered, whichever is less, and nothing more. The lucky majority of the insured population are those who suffer no loss because they do not encounter the adverse event, and they pay for the unlucky few who suffer the loss caused by the event.

The desire to have insurance is a desire to obtain help from others when one faces an unlikely event that has a significant financial cost. When all kinds of risks are covered for all people, insurance can be considered as "common good".

Those people who encounter expenses beyond the deductible (which is a proxy for the concept of "normal" expenses) can fulfill their payment needs by "invoking" their "claim" on the insurance and asking the organization to pay most of the expense instead of them paying that money themselves.

This is the "Full Price but paid by Insurance" payment model.

In principle, if everyone bought insurance, then only a very small fraction of this population suffers the unlikely undesirable event and its consequences and in such a situation they will be paid the amount that is covered or the amount of the actual loss, whichever is less. Those who do not suffer the unlikely event do not need any financial help and hence do not get any financial help from the insurer. Moreover, because everyone buys insurance, the risk is well distributed and hence costs less to insure.

In practice, not everyone buys insurance. This constrains the coverage and amounts covered for those who buy insurance. Those who do not buy insurance are left exposed to the adverse financial consequences of the unlikely events if they materialize for them. Since not everyone buys insurance, the risk is higher and hence costs more. Of those who buy insurance, they also make tradeoffs between coverage and premiums. Thus, in practice, the benefits from insurance are lower than what can be accomplished in principle.

This system of deductibles and involvement of the insurance in every "covered" need gives an impression to individuals that they all are getting their "money's worth" when they buy insurance. But when we consider the insurance premium and the deductible together, then to the extent that insurance covers merely the normal needs, such insurance coverage is just the normal and individualized expense. If one buys insurance for normal expenses and if the insurance provider makes a profit by providing insurance, then essentially everyone is paying fully for their own "normal needs" plus the profit that is being made in the process.

While insurance may appear to cover all needs in the insurance category, it is still a service provided by some for-profit organizations, and there are terms of service, and such documents are long and have plenty of "fine print" and that fine print excludes payments for a long list of things. These are things that are not covered by insurance. Usually the fine print is there to exclude the really costly stuff, and it is intended to limit the payment that the provider of the insurance is legally obliged to provide. For example, many automobile warranties do not cover wipers, brakes, tires and transmission, general wear and tear and collisions.

There are also exclusions for circumstances in which the need is not covered. Those individuals that encounter one of these exclusions become aware of the exclusion when their need is the greatest and the insurance does not cover the expenses. For example, in the case of life insurance, typically such insurance does not cover the needs of the beneficiary of that insurance if the insured person commits suicide. Another example is that of health insurance that does not cover preexisting conditions. In the case of health insurance, there are also limits to the expenses that are covered, so when a person's need is the greatest, that is when the insurance coverage ends!

Full Price but Subsidized and Rationed

There have been times of global hardships when basics for survival were in short supply. By "global hardships", we mean things like world wars, large scale famines and epidemics. By "basics for survival", we mean primarily food and the fuel to cook food. These shortages tempted traders and retailers to hoard and charge more than usual for these items. Since these were times of global hardships, employment opportunities were uncertain and since our survival depends on our employment system, people's survival was in jeopardy. To assist people in this basic survival need, governments took charge of the supplies of these basics for survival and "rationed" them to citizens at reasonably affordable prices. This is the motivation and origin of the "Full Price but Subsidized and Rationed" payment model. The most recent and most significant event of such global hardship was the second world war.

This kind of system is based on the following ideas:

  • Must operate on a nationwide scale.
  • Must provide the basics of survival to all.
  • Subsidize the price so that the poor can afford it.
  • Ration it so that everyone gets it.
  • Hence, implementation is in the hands of the government.
  • The government buys goods from producers at a "fixed and reasonable" price. Producers must sell most of their produce to the government.
  • The government is the retailer to ensure both rationing and subsidization.

All those ideas were acceptable in times of global hardship several decades ago, when a better system could not be imagined. However, there are problems in this system. First and foremost, the quality of the food materials is poor. This is because of the nationwide scale of operation and the operators (that is, the government officials) are not experts in this job of handling food supplies. Because of this poor quality, those who can afford higher prices, obtain higher quality food from elsewhere and hence never use this system. Since this system covers only basics for survival, the number of items covered is no more than a few tens of items. This means that poor people who rely on such subsidized food have very few choices. Poverty and the presence of this system means that the poor cannot have better choices even in modern times. In the desire to not discriminate, the price of the food is kept low and fixed. However, there are still "levels of being poor" and the "poorest of the poor" may find the price too high and the "richest of the poor" may find the quality lacking. Finally, people desire that governments keep costs down and "where to cut costs" is at the discretion of the decision makers in the government, and that has led to the situation that the quality of food materials does not get the attention that it deserves.

The "Full Price but Subsidized and Rationed" payment model has been evolving and improving slowly. But incremental progress in any system can only make it better, it cannot solve the fundamental problems in the system. Technology has progressed significantly in the last several decades, and we should be able to fulfill our "desire to make sure that everyone has the basics for survival" by a much better delivery system and a much better payment model and at the same time ensuring that these basics for survival are not wasted or hoarded or used for profiteering.

Full Price Plus Dissuasive Charge

Sometimes, society may impose a charge on a product or service in order to dissuade people from using such products or services because society is of the opinion that those products or services are harmful and impose extra costs on the society and this extra cost needs to be accounted for and collected from only those who engage in such harmful activity. Hence, this charge is imposed in addition to the usual taxes. Hence, this charge is collected from the buyer and paid to the society. This is the "Full Price Plus Dissuasive Charge" payment model.

Some of the illustrative examples of this payment model are found when buying substances that are considered harmful for health, like alcohol and cigarettes. Some other illustrative examples of this payment model are found when buying products that are considered harmful for the environment, like petrol or gasoline for vehicles or plastic bags for groceries.

The rationale of a dissuasion charge is that when a person has to pay something over and above the full price of the product or service and knowing that such an extra amount that is being charged will be transferred over to the society for remedying the ill effects of the purchased product or service, then this charge is expected to dissuade the buyer of the said product or service.

Usually, dissuasive charges are imposed on things that are mild in the adversity that they inflict. A dissuasive charge is the least that society can do without impinging on freedom to produce and consume that specific product or service.

Society should most definitely ban those things that have enormously adverse consequences. Enormous harm should be avoided, even if it means that some people do not have freedom in creating such enormously harmful products or services and some other people do not have the opportunity of consuming such enormously harmful products and services.

It is noteworthy that society attempts to "increase" the common good by imposing a charge on something that is being bought, rather than paying for the common good through taxes.

Full Price Minus Incentivizing Rebate

Sometimes, society may provide a rebate on the price of some products or services in order to encourage people to use such products or services because society is of the opinion that those products or services are somehow beneficial to society. The rebate is provided by the society even when the product or service is being sold with a profit motive, and such profits benefit the sellers of the products or services. This is the "Full Price Minus Incentivizing Rebate" payment model. Some of the illustrative examples of this payment model are found in the past when some countries gave rebates on electric cars, high efficiency furnaces, air conditioners, LED lights, etc. When this payment model is used for some product or service, that product or service is being promoted by the society by providing a financial incentive in the form of reduced price and society bears the cost of reducing the price. The rebate is the money provided by the society and paid to the seller of the product or service. Thus, the seller obtains the full price, but the buyer pays less than the full price by the amount of the rebate. In these cases, the society pays for part of the product or service because it deems that the product or service is "socially important" or "beneficial to society" and hence there is some "common good" in it.

Regarding incentivizing rebates on a high value item like electric cars, since the item is a high value, only the rich can comfortably afford it and hence they buy it and receive a subsidy. A poor person on the other hand may buy a used gasoline powered car by paying a price that is comparable to the entire rebate amount on the expensive electric car! So while society is subsidizing the rich in their buying of high value cars, the poor have to support their needs on their own. Is this a good use of taxes? Definitely not. Electric cars are not the only high value item that gets subsidized by society; there are more like solar rooftop panels.

Regarding incentivizing rebates on moderate value items like efficient furnaces and air conditioners, since they are not as expensive as electric cars, but still expensive enough, the rich can afford to pay the full price and the poor may have more use of the subsidy, and yet, if the price is high enough, the poor seek lower cost alternatives that are within their resources. The poor are really in need of subsidies - not the rich.

Giving incentivizing rebates without any consideration to the wealth of the individual to whom the rebate is given is a gross waste of taxes. The common good is never served by helping the rich, because the rich do not need such help.