We could curtail private spending by several trillion dollars a year without requiring painful sacrifices from anyone. That would be more than enough to rebuild our crumbling infrastructure and eliminate government indebtedness once and for all.

The most common mistake we make as teachers is attempting to tell our students too much.

If top marginal income tax rates are set too high, they discourage productive economic activity. In the limit, a top marginal income tax rate of 100 percent would mean that taxpayers would gain nothing from working harder or investing more. In contrast, a higher top marginal rate on consumption would actually encourage savings and investment. A top marginal consumption tax rate of 100 percent would simply mean that if a wealthy family spent an extra dollar, it would also owe an additional dollar of tax.

The fact that many private expenditures are mutually offsetting actually happens to constitute a remarkably good bit of fiscal news. Mutually offsetting spending patterns are wasteful in the same way that military arms races are. In such situations, if each party spends less, nothing is sacrificed, yet resources are freed up that can be put to much better uses.

No one could argue with a straight face that the couples getting married today are much happier just because their wedding celebrations cost three times as much as those in 1980. Bigger mansions and costlier parties are wasteful in the same sense that larger antlers on all bull elk are wasteful. The good news is that simple changes in the tax system can eliminate much of this waste without having to deny people the right to decide for themselves how best to spend their money.

Unless we can act collectively, there would be no way to defend ourselves, no way to define or enforce property rights. We couldn't curb congestion or pollution or build and maintain public infrastructure.

In short both the things we feel we need and the things available for us to buy depend largely—beyond some point, almost entirely—on the things that others choose to buy.