The government often intervenes when private markets fail to provide an optimal level of certain goods and services. For example, the government imposes an excise tax on gasoline to account for the negative externality that drivers impose on one another. Why might the private market not reach the socially optimal level of traffic without the help of government?

It is possible that everyone can agree that the roads are too crowded, but no one is willing to make the sacrifice to stay home to help solve the congestion problem. The private incentive to fix the problem is small, so government policies such as tolls and gasoline taxes may improve social welfare.