Irrelevant Externality Angst

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