Pigouvian taxes are government taxes that tax the party causing an externality by an amount equal to the externality.

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Pigouvian taxes are designed to correct negative externalities, such as pollution. By taxing the party causing the externality, the government can make it more expensive to engage in the activity and incentivize them to reduce their negative impact on society. This helps to create a more efficient and sustainable allocation of resources.

Pigouvian Taxes Are Government Taxes That Tax the Party Causing