Thomas Shogren, Chapter 3, Question #7

This chapter talks about externalities, both positive and negative, and the role of the government in a market economy. When making decisions I have only thought about the costs that I will have to deal with. In reality many of the decisions I make affect others as well. These costs are externalities. Sometimes my decisions are good for others making it a positive externality, while other times my decisions are bad making it a negative externality. The government steps into these situations in order to issue a rule in which my decisions are either made more expensive or cheaper. I never thought about the role of the government in my decisions because they are not telling me what to do, but the invisible hand of the government affects my decisions every day.