Introducing taxes on externalities is a form of central planning. And I agree that it's a very valuable tool. (Regulation is a very valuable tool as well. Which one works better depends on the particular situation, e.g. regulation is superior when levying the tax is difficult in the real world.)
Also, many people will argue that if a market is subject to such taxes, then it is no longer a free market. Perhaps you're not one of them and would consider such people misguided ideologues (we'd agree on that). However, the existence of such participants in the discussion needs to be acknowledged, and it very quickly feels like you're pointless talking about semantics.
> Introducing taxes on externalities is a form of central planning.
It isn't considered that by economists. It's a means of internalizing the externalities, not deciding what, when, how and by whom to provide goods and services.
> many people will argue that if a market is subject to such taxes, then it is no longer a free market.
They're wrong. Externalities are pushing costs onto other people without their consent, which is not free market.
Maybe we're just getting hung up on the word "free". Some people like to use it and so it slips into the discussion easily, but usually it distracts more than it adds to the discussion.
Every market has rules, and the term "free market" tends to degenerate into "market with rules that I happen to like", which isn't particularly useful.
Same for the "central planning" thing. It's always a matter of degree.
> Also, many people will argue that if a market is subject to such taxes, then it is no longer a free market.
Well, yeah.
“Free market” doesn't mean “free of regulation of which I personally disapprove”. If government has a thumb on the scale deliberately skewing outcomes, it's not a free market.
> Perhaps you're not one of them and would consider such people misguided ideologues
What does ideology have to do with that? One can oppose l’aissez faire capitalism (which Info, heartily) and recognize that Pigovian taxes are contrary to it.
Also, many people will argue that if a market is subject to such taxes, then it is no longer a free market. Perhaps you're not one of them and would consider such people misguided ideologues (we'd agree on that). However, the existence of such participants in the discussion needs to be acknowledged, and it very quickly feels like you're pointless talking about semantics.