Pigou’s Dial

Source: Bet On It
by Bryan Caplan

“A good intro econ class rubs psychologically normal humans the wrong way … for the first ten weeks. Instead of teaching a familiar pile of Social Desirability Bias, intro econ classes tell students about scarcity, supply-and-demand, and the efficiency of perfect competition. Around week 11, however, intro econ classes switch gears — and start teaching the theory of market failure. Above all, they present the concepts of positive and negative externalities, along with public goods and public bads. Which gives politically-aware students a great excuse to continue believing everything they thought before the class started. ‘Privatize and let the market work? Bah, haven’t you heard of positive externalities?! Pigou clearly showed that markets undersupply goods with positive externalities, which is why we need widespread government ownership.'” (05/24/23)