The late Milton Friedman once quipped that if the federal government were put in charge of the Sahara Desert, there would be a shortage of sand within five years. Similar skepticism about government led President Ronald Reagan to say in his first Inaugural Address, “Government is not the solution to our problem; government is the problem.” Government skeptics often insist, plausibly, that people spend their own money more carefully than any bureaucrat would. But that observation misses the larger point that individual and collective interests often fail to coincide. Individual purchases often entail large negative spillover effects on others. Spending that promotes individual interests is, in fact, directly responsible for many of the greatest threats now facing society. The good news is that a simple, unintrusive policy measures could easily help avoid those threats.
Discussion/Questions:
- Give two examples of behaviors that promote individual interests but lead to outcomes that all regard as undesirable.
- Give two examples of taxes that help bring individual and collective interests into closer alignment.
Source: The New York Times: Why the Markets Need a Strong Government Hand by Robert H. Frank. Photo by Eugene Ga on Unsplash.