Diane Coyle

In the face of externalities of any kind, markets do not produce the most desirable outcomes. This is true in the case of the public good, which is why we have such a lively debate about the proper role of government in capitalist societies. It is also true of environmental externalities. The limitations of markets are clear, and although almost all economists are in favor of capitalism and growth, they certainly believe markets need to be regulated. Economists understand that completely free markets are an intellectual abstraction (like perfect competition); it is anticapitalists who think of free markets as the dangerous reality.

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