THE END OF THE EXTERNALITY REVOLUTION

In the early 1970s, we and others in the economics profession became enamored with the notion of externalties—a cost or benefit imposed on or provided to others but not taken into account by the economic agents who generate the effect. We, and others, seemed to see external effects everywhere. There was polluted water and air, noise, urban blight, traffic congestion, and other features of modern life that seemed to call out for some form of...