There are critics of using externalities to justify regulation. Ronald Coase has suggested that bystanders may already be compensated for externalities through cheaper land purchases or higher wages for employees in dangerous industries. The costs of controlling externalities must be weighed against the benefits expected before society implements any costly regulatory policy. Public Goods . Markets fail to provide some goods or services efficiently or in sufficient quantities for society.
Public goods are goods and services that are usually provided by government.
Generally, there is no additional or marginal cost in providing public goods to an additional person, e.g., nonrival , and it is difficult to exclude anyone from consuming them. For example, private enterprise is unlikely to provide the sea navigational assistance of a lighthouse. Shipowners, consumers, and suppliers share the benefit of safe and reliable trade when government provides lighthouse safety services, a classic public good. Government provides tax financed public goods or regulation to cure the market's failure to supply them. Garrett Hardin illustrates the public goods problem in his famous narrative on the Tragedy of the Commons .