CONTENTS • xv 18 Externalities and Public Goods 661 18.1 Externalities 661 Negative Externalities and Inefficiency 662 Positive Externalities and Inefficiency 664 18.2 Ways of Correcting Market Failure 667 An Emissions Standard 668 An Emissions Fee 668 Standards versus Fees 669 Tradeable Emissions Permits 671 Recycling 675 18.3 Stock Externalities 678 Stock Buildup and Its Impact 679 18.4 Externalities and Property Rights 684 Property Rights 684 Bargaining and Economic Efficiency 685 Costly Bargaining—The Role of Strategic Behavior 686 A Legal Solution—Suing for Damages 686 18.5 Common Property Resources 687 18.6 Public Goods 690 Efficiency and Public Goods 691 Public Goods and Market Failure 692 18.7 Private Preferences for Public Goods 694 Summary 696 Questions for Review 696 Exercises 697 APPENDIX: The Basics of Regression 700 An Example 700 Estimation 701 Statistical Tests 702 Goodness of Fit 704 Economic Forecasting 704 Summary 707 Glossary 708 Answers to Selected Exercises Photo Credits Index 732 731 718