Rights to property that can be used by all citizens as intensively as
they desire. No one has the right to exclude
another from the use of such property. These rights are
sometimes referred to as common property rights.
Beneficial effects of group or individual action on the
welfare of non-paying secondary parties.
Harmful effects of an individual's or a group's action on the welfare of
nonconsenting secondary parties. Litterbugs, drunk drivers, and
polluters, for example, create external costs.
One who receives the benefit of a good without contributing to its costs.
Public goods and commodities that generate external benefits
offer people the opportunity to become free riders.
The failure of the market system to attain hypothetically ideal
allocative efficiency. This means that potential gain exists
that has not been captured. However, the cost of establishing
mechanism that could potentially capture the gain may exceed the
benefits. Therefore, it is not always possible to improve the
situation.
The maximum amount of pollution that a polluter is permitted to emit,
established by the government or a regulatory authority. Fines
are generally imposed on those who are unwilling or unable to
comply.
Property rights that are exclusively held by an owner, and that can be
transferred to others at the owner's discretion.
An item purchased often by the same buyer. Examples would include
products like soap toothpaste, potato chips, milk, and butter.
The sum of (a) the private costs that are incurred by a decision-maker
and (b) any external costs of the action that are imposed
on nonconsenting secondary parties. If there are no
external costs, private and social costs will be equal.
