Maggie Chamberlain, Chapter 3, Question 4

Wheelan proposes that we tax the source of the negative externalities, such as placing a tax on gas or emissions from a car rather than raising the price of the car itself. I initially liked the idea, since it would discourage a behavior that has negative externalities, driving, and would allow for a decreased tax on things like income, a behavior that should to be encouraged. However, this plan would not have perfect, long-lasting results. Each individual is different, so, using the vehicle example, if you raise the price of driving a bigger car to $9 a gallon, you might be preventing the contractor who needs the truck to haul lumber but can't afford such an expensive car from getting a suitable car for his needs. A large power can't control everything. Government must be seen as a necessary overseer, and many issues must be solved between individuals or smaller parties, using the Coase Theory, in order to more directly change one party's behavior from forcing its negative externalities upon another party.