After reading this chapter I understood and became comfortable with the concept of externalities, the author`s writing is intelligible, but more importantly, it shares valuable ideas. Firstly, Wheelan has introduced me to the problem of private costs and social costs. He said that when the gap between the private costs and social costs is too big, we tend to do things that make us, individuals, better off on the expense of others. He has named a lot of negative externalities, the one that I remembered- maybe because he compared children with cigarettes, however I must admit that, yes they are both negative externalities. The main point was that the parents don´t care whether someone is complaining about the noise, because their child is travelling for free (making themselves better off on the expense of others). When I walk in the downtown Minneapolis and enjoy the view on the skyscrapers, which we don´t have at Slovakia, I don´t need to pay for looking at them, this has been named as the positive externality. Secondly, market fails to make us better off, so the government or the private parties themselves try to solve the problem and eventually, they are able to come up with an efficient solution. Government is the one that makes market possible, because it sets the rules. It defines and protects the property rights. We can do anything with it, but there are some limits. He has simplified the function of government and us individuals to one sentence. "I cannot build a missile defense system, or protect endangered species, or stop global warming, or install traffic lights, or regulate the New York Stock Exchange, or negotiate lower trade barriers with China, Government enables us to work collectively to do those things" (79).
Tereza Sinkovicova
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