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Where Externalities Lie

Here’s a letter that I sent today to the Wall Street Journal.

To the Editor:

many others, Professor Hendrik Van den Berg insists that "we need to
raise the price of gasoline by introducing a tax that reflects the
congestion, environmental and national security costs of oil" (Letters,
July 3
).  I disagree.

First, government already taxes oil
production and gasoline.  How does Prof. Van den Berg know that the
current level of taxation is inadequate?  Second, government itself is
a steamy swamp of negative externalities.  Not only do politicians and
bureaucrats spend other people’s money, they do so overwhelmingly while
under the influence of special-interest groups.  The only tax that we
should raise is one that increases the cost of using government.

Donald J. Boudreaux

I am consistently amazed at the way so many persons — including (especially?) economists — cleverly identify real or imagined externalities in private markets and then propose political "solutions" for these alleged problems as if the government officials who will design and implement these "solutions" are wise, well-informed, and pure of motive.