With a Prologue by Charles K. Rowley and an Epilogue by John Burton
However, the original analysts of social costs/benefits were led into error by failing to test their propositions against the evidence of real life. Painstaking empirical studies clearly demonstrate these errors.
A divergence between private and social cost is no decisive justification for government action to correct it. The costs of intervention often outweigh the social benefits.
Moreover, the alleged ‘externalities’ are merely uncontracted effects. Under private property rights, the use of contracts to transact what have been regarded as ‘external’ effects is far more common than has been commonly recognised.