Most economists argue that markets ordinarily are the superior means for fulfilling human wants. In a market, deals are ideally struck between consenting adults only when the parties feel they are likely to benefit. Society as a whole is thought to gain from the aggregation of individual deals that take place. The wealth of a society grows by means of what is called the hidden hand of free market mechanisms, which offers spontaneous coordination with a minimum of coercion and explicit central direction. However, the market system is complicated by so-called externalities, which are effects of private market activity not captured in the price system.

Economics distinguishes between positive and negative externalities. A positive externality exists when producers cannot appropriate all the benefits of their activities. An example would be research and development, which yields benefits to society that the producer cannot capture, such as employment in subsidiary...