A role for government (2): Dealing with externalities

This previous post tells the story of how government can deal with externalities (which, by the way, is a very important concept for you to know, so click the link!) through regulations. Now, economists usually prefer a different means to deal with externalities, i.e., taxation. Specifically, it is usually called a “Pigovian tax“. In fact, [...]

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A role of government (1): Providing public goods

An interesting thing about Chapter 4, which I plan to cover next week, is on the role of government. So far, I have argued that in general, the market system is a good thing because it is efficient. However, there are circumstances in which markets do not work very well in allocating resources. We call [...]

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In the news: Local business, “municipal” cost

In today’s LA Times, an example of negative externalities which is an important subject of Chapter 4. On the one hand, the private benefits of rush-hour parking: Customers hoping to savor challah at their Shabbat dinners know that the line often trails out the door of Delice Bakery on West Pico Boulevard. The purveyor of [...]

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