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.

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.

The most glaring deficiency in traditional economic models is that they completely ignore the role of context in evaluation.

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.

As John Maynard Keynes taught us in the 1930s, in such situations, government is the only entity with both the motive and the ability to boost total spending by enough to put people back to work. As it happens there are long lists of important public projects that cry out to be done.

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

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.