A.C. Pigou

A.C. Pigou was an economist who studied how government policies can correct economic problems caused by negative or positive externalities—costs or benefits not reflected in market prices. For example, he argued that pollution (a negative externality) should be taxed to discourage harmful activity, while subsidies could encourage beneficial actions like education. His work laid the foundation for what is now called "Pigovian taxes," which aim to align private incentives with social well-being. Overall, Pigou emphasized that government intervention can help make markets more efficient and fair by addressing these external effects.