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@Courant
This year's first Reith lecture is super interesting and very relevant to this discussion:
http://www.bbc.co.uk/programmes/b00729d9
Well worth a listen. Two things that struck me were:
Use of incentives may erode people's natural desire to do something good - he gave a fascinating example of blood donation system in the States (where people are paid) vs here (voluntary) and found the payment system led to all sorts of problems.
Taxes change people's perception of the thing they're being taxed for, shifting it from something that people might consider undesirable, to something that's a right. This really reminds of a trip I had to Oz (Sydney drivers are massively agressive towards cyclists, particularly road cyclists - amazing really, given the sporting ethos but, anyway, that's another discussion!), where I was talking to a cyclist who said common abuse thrown at him included, "get a f*****g rego, mate", or words to that effect. (rego==road tax) In other words, car drivers thought they owned the road because they paid tax, thus could behave as they wanted....
Courant