In a free-market economy, a product which entails a positive externality will be
Iâm sure most economists would accept the existence of externalities, both negative and positive. If there are negative and positive externalities, there is a clear argument that this will lead to market failure. For example: 1  Positive externalities and market failure.2  Negative externalities and market failure. would argue that health care is a clear case of a service which has a strong positive externality. If you look at standards of public health in the Ninenteenth Century, death rates were much higher. It is in everyoneâs interest to provide a minimum level of public health because everyone benefits.