Chapter 3

Externalities. Honestly I don't know if I completly understand the concept, but the authors examples helped. The concept of externalities is one that will effect me through out my life. The examples given at the beginning of the chapter helped me understand it once the government came into play. Such as: basically externalities is a situation in which people are doing something on their behalf and it may effect the rest of us negatively or positively. He then continued to say that a favored way to deal with externalities is taxing the offending behavior rather than banning it. I took this as meaning (I think) that instead of continuously denying different tactics, you tax the more difficult decision or the situation that would be the most inconvenient for most people. By doing this it lowers/limits the negative externality's power, it might be used to lower another kind of tax such as payroll or income. The author, and many others wouldn't say that taxing externalities is a perfect solution , but it is a reliable option (at times). So in the future, when a controversial issue comes up, and they start to tax the most negative option, I can understand why, buy less of that product and continue on with my day. Or when a company that is openingly polluting the enviornment continues its business, I know it is because they are allowed to do their work but are being (punished) taxed.