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More on Externalities

Milton Friedman argues that government isn’t always the best answer to market failure, because of the possibility of “government failure”:

His example (at 5:10), of Tris being used in children’s sleepwear to make them flame-retardant, was especially relevant to me. I was a child when this happened, and remembered wearing “flame-retardant” pajamas.

I find many of my students have an innocent, almost naive faith in the goodness of governments as opposed to businesses. They assume governments act in the interest of the people, and businesses act in their own interest.


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