> How do you think externalities should be solved?
The only way to solve them is the way suggested by Coase's Theorem: reduce transaction costs to the point where voluntary trades will internalize the externalities. Of course this solution is not always possible, but that just means that in cases where it's not, no solution is possible. There is nothing that requires the universe to always make solutions possible for whatever issues we humans perceive. Certainly it does not follow from the fact that voluntary trades cannot always solve externalities, that government interference in markets does solve them. It doesn't; as I said, it makes them worse.
The only way to solve them is the way suggested by Coase's Theorem: reduce transaction costs to the point where voluntary trades will internalize the externalities. Of course this solution is not always possible, but that just means that in cases where it's not, no solution is possible. There is nothing that requires the universe to always make solutions possible for whatever issues we humans perceive. Certainly it does not follow from the fact that voluntary trades cannot always solve externalities, that government interference in markets does solve them. It doesn't; as I said, it makes them worse.