Changes

Illegal drugs create perhaps the largest negative externality.  The transaction is between the drug dealer and the drug addict, but when that drug addict runs out of money due to his habit then he is going to turn to crime.  Soon he will be robbing and even killing people to obtain money to feed his addiction.  The victims of this crime bear the negative externality.

Illegal drugs create perhaps the largest negative externality.  The transaction is between the drug dealer and the drug addict, but when that drug addict runs out of money due to his habit then he is going to turn to crime.  Soon he will be robbing and even killing people to obtain money to feed his addiction.  The victims of this crime bear the negative externality.

Libertarians promote a philosophy of "let everyone do what they want."  But that approach ignores the harm caused by negative externalities.  Letting someone get drunk will sometimes result in his driving drunk, and then killing an innocent person who had nothing to do with the purchase and sale of the alcohol.  Should alcohol companies pay for the negative externalities caused by their good?  Should abortion providers pay for the negative externalities caused by abortion?  Many would answer "yes" to both.

Libertarians promote a philosophy of "let everyone do what they want."  But that approach ignores the harm caused by negative externalities.  Letting someone get drunk will sometimes result in his driving drunk, and then killing an innocent person who had nothing to do with the purchase and sale of the alcohol.  Should alcohol companies pay for the negative externalities caused by their good? Many would say "yes". Should abortionists and Planned Parenthood pay damages for the enormous and lifelong negative externalities caused by abortion?  Many would answer "yes" to that also.

Let's consider what can be done about positive and negative externalities.  It is desirable to eliminate or minimize the negative externalities, so that sellers bear all the costs of their production and sales.  How can they be required to pay all of their costs, rather than pushing those costs onto the public?

Let's consider what can be done about positive and negative externalities.  It is desirable to eliminate or minimize the negative externalities, so that sellers bear all the costs of their production and sales.  How can they be required to pay all of their costs, rather than pushing those costs onto the public?

“Public choice theory” recognizes that self-interested politicians can act contrary to public interest.  Politicians are known to maximize their own interests, such as their own relative salaries and pensions and control over others, in setting tax policy, rather than maximizing public interests.   

“Public choice theory” recognizes that self-interested politicians can act contrary to public interest.  Politicians are known to maximize their own interests, such as their own relative salaries and pensions and control over others, in setting tax policy, rather than maximizing public interests.   

Remember the economist Ronald Coase?  He would say that the reason for externalities is transaction costs.  If it were practical to give everyone a right to be free from pollution, and then allow them to sell it without incurring transaction costs, then pollution would become a good that is bought and sold like any other good and it would no longer be a negative externality.  Most people would accept small payments from Exxon and other oil companies in exchange for accepting a little pollution to their lives, if transaction costs weren’t larger than the payments.  We would not need additional taxes on gasoline by an inefficient government.

Remember the economist Ronald Coase?  He would say that the reason for externalities is transaction costs.  If it were practical to give everyone a right to be free from pollution, and then allow them to sell it without incurring transaction costs, then pollution would become a good that is bought and sold like any other good and it would no longer be a negative externality.  Most people would accept small payments from Exxon and other oil companies in exchange for allowing a little pollution in their lives, if transaction costs weren’t larger than the payments.  We would not need additional taxes on gasoline by an inefficient government.

=== Positive Externalities===

=== Positive Externalities===

:In 2008, "the average salary for a federal government employee was $79,197. The average salary for a private employee in the United States was $49,935. ...  Orange County Sheriff Sandra Hutchens earns almost half a million dollars a year between her current salary as sheriff and her pension from the Los Angeles County Sheriff's Department.  And Ms. Hutchens is not alone. Orange County CEO, Tom Mauk also earns close to $500,000 a year with his current salary from the County and his pension from working for La Habra."

:In 2008, "the average salary for a federal government employee was $79,197. The average salary for a private employee in the United States was $49,935. ...  Orange County Sheriff Sandra Hutchens earns almost half a million dollars a year between her current salary as sheriff and her pension from the Los Angeles County Sheriff's Department.  And Ms. Hutchens is not alone. Orange County CEO, Tom Mauk also earns close to $500,000 a year with his current salary from the County and his pension from working for La Habra."

Superintendents of public school districts in New Jersey are paid hundreds of thousands of dollars each year in salaries and pensions.  In electing a new governor who advocates lower taxes, voters may have been wondering what they are getting in return for paying such high taxes in New Jersey.

Superintendents of public school districts in New Jersey are paid hundreds of thousands of dollars each year in salaries and pensions.  In electing a new governor of New Jersey who advocates lower taxes, voters may have been wondering what they are getting in return for paying such high taxes.

===Honors Example===

===Honors Example===