Think about the externalities, both negative and positive, that play a huge part in your life; and think about the sticks and carrots that attempt to align your self-interest with the social interest.
You respond to the stick of the gasoline tax by buying a little bit less gas than you otherwise would. As you saw inÂ Eye on Climate ChangeÂ (p. 234), this stick is small compared to that in some other countries. With a bigger gas tax, such as that in the United Kingdom, for example, you would find a way of getting by with a smaller quantity of gasoline and your actions and those of millions of others would make the traffic on our roads and highways much lighter.
You are responding to the huge carrot of subsidized tuition by being in school. Faced with full-cost tuition, many people would quit school. Without subsidized college education, fewer people would attend college and with fewer college graduates, the benefits we all receive from living in a well-educated society would be smaller.
Think about your attitude as a citizen-voter to these two externalities.
Have our politicians set the right incentives? Should the gas tax be higher to discourage the use of cars? Should tuition be even lower to encourage more people to go to school (and therefore, raise taxes to pay for subsidized education)? Or have we got these incentives just right in the social interest?
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