Private collective action

induce consumers to buy less. Additional output of goods which yield external benefits can be obtained by giving subsidies to private sector firms for producing them. Or those suffering external costs can be compensated: grants towards double glazing near airports is an example. Alternatively the government can try to produce the goods in the public sector in socially efficient quantities.... Legal prohibition is an important way of either preventing individuals and firms from creating external costs, or forcing the perpetrators to internalize the cost and so reflect them in market prices. Planning regulations, pollution controls, speed and weight restrictions on roads, are all methods of reducing external costs. For example, the proposed EC limits on car exhaust emissions will require more expensive car engines or catalytic converters, so internalizing the cost of air pollution by making motorists pay for preventive action. But government intervention is not the only way to cope with the problem of socially inefficient resource allocation due to externalities. Private collective action is possible and does occur. For instance volunteer groups create external benefits by improving the appearance of the environment

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