ABSTRACT
Externalities are unavoidable in both market and government signalling and incentive systems, and for the same reason: perfect feedback about the benefits and costs of decisions is too costly. Monitoring and penalising of planners are non-rival and non-excludable goods, with the usual incentives for individual citizens to free ride on the contributions of others. The individual consumer faces similar problems of remoteness from responsible decision makers, and similar incentives to free ride, when dealing with large bureaucratic private suppliers such as banks, insurance companies or airlines. Like market participants, planning agencies have to bear the costs of: In addition, because planners are third parties with their own incentives, citizens bear the costs of monitoring and rewarding or penalising the planners.
