Re: Positive externalities - Big gov\'t supporters argument sought
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I'm not sure what you don't get. Obviously there are a lot of practical and ethical concerns, as with any government program, but the basics are pretty simple. Project X provides $Y of benefits captured by the producer and $Z of benefits beyond his ability to capture. If X costs between Y and Z dollars, it won't get done even though doing it would increase total welfare. If the participants are all known to each other, it's possible that a Coasian solution could be derived, but in most situations, transaction costs would be too large. So, a government solution at least has the potential to increase total welfare with a subsidy.
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Government doesn't make the transaction costs magically disappear. It just hides them.
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