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On freedom and pricing for negative externalities

December 21, 2008

Joel and I had a protracted discussion about liberty, tax, the role of the government and assorted other topics last night (and early this morning).  It was an interesting discussion, because I am a strong believer in individual liberties as long as they are taxed at a level that reflects their true cost to society.  Thus, I think cigarettes should be taxed to a level that covers the cost of all negative effects that cigarette smoking has on society.  Similarly, I think marijuana should be legal, but that supply should be controlled, quality monitored, and it should be taxed to a level that directly offsets the costs of drug prevention and treatment programs, and direct medical assistance for people who have medical problems due to marijuana.

When our discussion finally drew to a close at 3:45am, what should I discover when I checked my computer before bed, but this post from Ezra Klein on a very similar topic.  How funny!!!

I think making things reflect their true cost whilst at the same time discouraging objectively bad things is a good thing for the government to do.

Oh, and for what it’s worth, I am a very big believer in tax on unhealthy foods.  I think unhealthy food should be priced in such a manner that it is financially unappealing, rather than, as it currently is, one of the cheapest options.

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