Externality and Institutions - Andreas A. Papandreou - Google Books

http://books.google.de/books?id=hjsNE_QjPuEC&pg=PA114&dq=arrow+the+failure+of+markets+to+exist&hl=de&ei=bHSjTayeHIzHsgbC0cyZBw&s

Pollution, higher traffic noise, or a poisoned river are all examples of externalities - costs (or benefits) which are imposed by an action but which are not built in to the price of that action. One of the problems of economic theory is whether, when…