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 private sector is first of all much larger than the public sector. The waste we see in that sector does not result from the fact that people spend their money carelessly. Mostly, it occurs because what one family must spend to achieve its goals often depends heavily on what other families spend.

Life is graded on the curve. It's not how big you are, how strong you are, how smart you are. It's how good you are at the things that count relative to the people around you.

If the search is for examples that contradict the predictions of standard economic models, a good rule of thumb is to start in France.

The link between rational individual behavior and collectively desirable outcomes is extremely tenuous.

When the rich build bigger, they shift the frame of reference that shapes the demands of the near rich, who travel in the same social circles. Perhaps it's now the custom in those circles to host your daughter's wedding reception at home rather than in a hotel or country club. So the near rich feel they too need a house with a ballroom. And when they build bigger, they shift the frame of reference for the group just below them, and so on, all the way down.

Only the federal government has the power to spend beyond its current revenue. It shouldn't do that when the economy is at full employment. But it's an essential step for an economy mired in recession.