Irrelevant Externality Angst

David D. Haddock
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David D. Haddock: Professor of Law and Professor of Economics, Northwestern University, 3238 Arthur Andersen Hall, 2001 Sheridan Road, Evanston, IL 60208-2600, and Senior Fellow, PERC – Property & Environment Research Center, 2048 Analysis Drive, Bozeman, MT 59718, USA. dhaddock@northwestern.edu

Journal of Interdisciplinary Economics, 2007, vol. 19, issue 1, 3-18

Abstract: Public goods are perplexing because insuperable transaction costs are encountered when optimization requires comprehensive negotiation among large populations of beneficiaries. Though scrutiny is certainly warranted, private internalization of public goods externalities is common. Even when many parties can freely utilize the good, if most experience a real but marginally irrelevant external effect, private interactions among the few who experience relevant impacts can suitably balance marginal costs and benefits across entire populations. It is impossible to ascertain the desirability or form of government intervention if empirical tasks are neglected on the basis of inconclusive theoretical conjectures. Journal of Economic Literature Classification: D23, D62, D78, H41, K32, P16, Q28

Date: 2007
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