Externalities can only exist with public goods, such as the commons or air pollution. The more public goods, the more chances of externalities.
Market failure is a subjective term that assumes a problem can be always be solved fairly (no one is made worse off). That euphemism tends to be used by those who believe "free market" (no such thing) solutions are inferior to state-imposed solutions, which often involve force and/or benefit the ruling class. There's plenty of empirical evidence to support that.
> Market failure is a subjective term that assumes a problem can be always be solved fairly (no one is made worse off). That euphemism tends to be used by those who believe "free market" (no such thing) solutions are inferior to state-imposed solutions, which often involve force and/or benefit the ruling class. There's plenty of empirical evidence to support that.
Market failure is defined as a situation in which markets fail to achieve pareto efficiency; pareto inefficiency is definitionally the condition where someone's situation can be improved fairly, as you call it. A few heterodox schools simply choose a different definition of efficiency to wave away the problem of market failure, but this is circular logic: They define markets as the best system of allocating resources and therefore it is impossible for markets to fail.
If that's the position you want to take, please be forthright about your assumptions. I no longer think we're using the same basic definitions and I am fairly certain I am talking about well established mainstream concepts in economics.
P.S.
> state-imposed solutions, which often involve force
Private property as it exists is definitionally a state-imposed by force concept. I don't think your moral claim about people who use the term market failure is as biting an indictment as you think.
How am I not forthright about my assumptions? I started this all off by simply stating that privately owned resources can be traded to their highest utility, and you seem to have a roundabout way of challenging that claim. Empirical evidence would be the most direct way.
And while state-enforced property rights have enabled many other technological advancements and objectively moral outcomes, this does not give the state the moral high ground to use force for its own arbitrary purposes. On the micro scale, just because my authority allows my children to claim their own space, clothes, etc. doesn't necessarily mean that authority can always lead to good outcomes in every interaction they have with each other. It's just a means to an end, like the state.
Market failure is a subjective term that assumes a problem can be always be solved fairly (no one is made worse off). That euphemism tends to be used by those who believe "free market" (no such thing) solutions are inferior to state-imposed solutions, which often involve force and/or benefit the ruling class. There's plenty of empirical evidence to support that.