There's no indication that middle-income families feel resentful about the bigger mansions and yachts. But the near-rich, whose social circles intersect those of the rich, are subtly influenced by them.

The upshot is that to send its children to a school of even average quality, a family must outbid half of other similar families who are pursuing the same goal. And that's become dramatically more expensive because of the growth in median house size, which was in turn caused by higher spending at the top.

In almost every instance, air and water quality goals were met more cheaply and quickly when we taxed pollution than when we tried to regulate it directly.

Virtually all families in the middle of the earnings distribution aspire to send their children to a school of at least average quality. (We'd think ill of any parent whose aspirations were lower.) The rub is that the best schools tend to be located in more expensive neighborhoods.

As the great naturalist Charles Darwin saw clearly, individual and collective interests often coincide, as in the invisible hand narrative. But he also saw that in many other cases, interests at the two levels are squarely in conflict, and that in those cases, individual interests generally trump. That simple observation suggests that market failure is often the result not of insufficient competition (the traditional charge from social critics on the Left), but of the very logic of competition itself.

In the long run, greater investment would mean greater productivity and income growth.

Every group spends more when its income grows.