Mankiw states (Principle # 7) that “Governments can sometimes improve market outcomes.” He gives an example (pollution.) Isn’t he correct?
Pollution is trespass. Mankiw is full of it. If govt stops pollution (mostly, it adds to it), it isn’t improving a market outcome, since pollution isn’t a market outcome in the first place. Private pollution is an anti market phenomenon, just like rape, theft, murder. The market consists of all voluntary interactions (buying, selling, lending, borrowing, gambling, renting, gift giving, etc.) Pollution ain’t voluntary.
Here’s the best thing ever written on pollution:
Rothbard, Murray N. 1982. “Law, Property Rights, and Air Pollution,” Cato Journal, Vol. 2, No. 1, Spring; reprinted in Block, Walter E. Ed. Economics and the Environment: A Reconciliation, Vancouver: The Fraser Institute, 1990, pp. 233-279; http://mises.org/story/2120; http://www.mises.org/rothbard/lawproperty.pdf;2:32 am on April 28, 2020 Email Walter E. Block