What if someone had invented “smog-eating” concrete roof tiles? And, what if these tiles consumed enough smog to offset one car’s nitrous oxide emissions during one year (10,800 miles of driving)?
Telling us that a firm in California has them for sale, Harvard professor Greg Mankiw asks, “What should government policy be regarding these roof tiles?” Similarly, do you believe that government should mandate posting calorie counts in restaurants? Or subsidizing ethanol? Hybrid cars? Broccoli consumption? (so that medical care is cheaper) Mowing the lawn? (because, with house sales plunging, a nicer neighborhood could attract buyers)
The Economic Lesson
In his 1759 book, The Theory of Moral Sentiments, Adam Smith (1723-1790) tried to identify the origins of a just and virtuous society. Concluding that no one is wise enough to know what is best for most, he recommended less government for all.
And yet, through tax and regulatory policy, should government encourage positive externalities–transactions between two parties that affect a third individual or group in some beneficial way?