I think the silliness comes from trying to apply idea of subsidies to people, the concept is meant for companies operating in a market. It's meant to address fairness of one company competing with another.
It's not arbitrary, companies and countries sue each other in WTO to address different level of subsidies. I never heard of criminals doing the same. I think we are not looking to optimise rates of car theft with market forces. Do you?
Companies are different entities entirely, we don't talk about profit when we educate schoolkids, and I can't write off expenses before paying income tax, while companies can.
Right, there’s sort of a gentlemen’s agreement not to be consistent regarding the equation of subsidies and “unrecovered negative externalities”. That just means that if you have enough political power, you can ignore demands to be consistent. It doesn’t mean, as you seem to think, that there’s an actual substantive difference between:
a) “Letting polluters get away with not compensating victims of pollution is a subsidy.” vs
b) “Letting muggers get away with not compensating their victims is a subsidy.”
