Reading Guide

Table of Contents from Taylor:

Chapter Number/Title; Sub-section titles and page numbers

Jim’s Comments

14 Environmental Protection and Negative Externalities 263

Externalities 265
Pollution as a Negative Externality 265
Command-and-Control Regulation 267
Market-Oriented Environmental Tools 268

Market-Friendly Environmental Tool #1: Pollution Charges 268
Market-Friendly Environmental Tool #2: Marketable Permits 270
Market-Friendly Environmental Tool #3: Better-Defined Property Rights 271
Applying Market-Oriented Environmental Tools 272

The Benefits and Costs of U.S. Environmental Laws 273

Benefits and Costs of Clean Air and Clean Water 273
Marginal Benefits and Marginal Costs 274
The Unrealistic Goal of Zero Pollution 275

International Environmental Issues 276
The Trade-off between Economic Output and  Environmental Protection 277
Key Concepts and Summary 278
Review Questions 279

Read closely the highlighted parts
on the definition & concept of 

The remaining sections of this chapter
are not required, but you may find them
interesting if you are interested in
environmental issues.

15 Technology, Positive Externalities, and Public Goods 281

The Incentives for Developing New Technology 283

Some Grumpy Inventors 284
The Positive Externalities of New Technology 284
Contrasting Positive Externalities and Negative Externalities 286

How to Raise the Rate of Return for Innovators 287

Intellectual Property Rights 287
Government Spending on Research and Development 289
Tax Breaks for Research and Development 290
Cooperative Research and Development 290
A Balancing Act 291

Public Goods 291

The Definition of a Public Good 291
The Free Rider Problem 293
The Role of Government in Paying for Public Goods 294

Positive Externalities and Public Goods 294
Key Concepts and Summary 295
Review Questions 296

Read closely the highlighted parts.
Pay close attention to Exhibit 15-3
and the definition/concept of public
goods and the “free rider problem”.
16 Poverty and Economic Inequality 297

Drawing the Poverty Line 298
The Poverty Trap 300
The Safety Net 302

Temporary Assistance for Needy Families 303
Earned Income Credit (EIC) 303
Food Stamps 304
Medicaid 304
Other Safety Net Programs 305

Measuring Income Inequality 305

Income Distribution by Quintiles 305
Lorenz Curve 306

Causes of Growing Income Inequality 308

The Changing Composition of American Households 308
A Shift in the Distribution of Wages 308

Government Policies to Reduce Income Inequality 310

Redistribution 311
The Ladder of Opportunity 311
Inheritance Taxes 313

The Trade-off between Incentives and Income Equality 313
Key Concepts and Summary 315
Review Questions 316

Read closely the highlighted parts.


20 Public Choice 375

When Voters Don’t Participate 376
Special-Interest Politics 378
Identifiable Winners, Anonymous Losers 379
Pork Barrels and Log-Rolling 380
Voting Cycles 381
Where Is Government’s Self-Correcting Mechanism? 383
A Balanced View of Markets and Government 383
Key Concepts and Summary 384
Review Questions 385
Read closely the entire chapter.