About Subsidies...

[oldreliable67]

The market price does not take things into account that are positive externalities. Its why we have things like intellectual property, subsidies for education, etc.

Not so sure about that. If left to its own devices, the market will/would value anything and everything. But when confronted with goods or services that have socially desirable aspects and costs of provision ("externalities") that deny those social goods or services to too large a segment of society, then subsidies are indeed called for and instituted. The "market" will adjust to take any subsidies into account. Subsidies or no, externalities or no, the market will take them into its pricing structure.

 

[drz-400]

Not so sure about that. If left to its own devices, the market will/would value anything and everything. But when confronted with goods or services that have socially desirable aspects and costs of provision ("externalities") that deny those social goods or services to too large a segment of society, then subsidies are indeed called for and instituted. The "market" will adjust to take any subsidies into account. Subsidies or no, externalities or no, the market will take them into its pricing structure.

It is literally the definition of an externality, that it is outside the market price.

 

[Mensch]

But what is outside the market (not market price, but market in general)?

 

[phattonez]

Negative extenalities are forced to be internalized by surrounding property owners. Positive extenalities are willingly internalized.