Introduction

Governments affect human welfare in at least four ways. They do so by providing more or less of the goods and services that are complementary to private production and consumption (production), or are otherwise not provided or underprovided by the private sector for lack of profitability. They may distort (for better or for worse), obstruct, or burden private sector production and consumption, with taxes and subsidies (taxation and subsidies). They may limit the freedom to access the goods and services that are otherwise available in the market, or otherwise regulate all kinds of private sector activities (prohibition and regulation). They may redistribute income and wealth (redistribution).