Pigouvian versus Marshallian tax: market failure, public intervention and the problem of externalities

Deregulating a Developmental State: Changes since South Korea's 1998 Regulatory Reform

“…The administrative state in the 20 th century was expected to play active roles in the aftermath of both World Wars and also amid economic depressions; even during the rapid economic development, the unemployment soared and income disparity got worsened, which has led to the unfair distribution of the public good. To solve the economic and social problems of an unstable economy resulting from market failure, the government actively intervened (Caldari and Masini 2011). State intervention in the economy was directly associated with a debate on the extent of state intervention in free competition between individuals and companies in the market such as restricting or directing the activities of companies, individuals, and organizations.…”

A Theory of Impact Bonds as an Alternative to Pigouvian Tax and Public Provision: Application for Climate Change

“…Under Arthur Pigou's analysis, an externality occurs when the private impact of selling a unit of a good is different from the social impact (Caldari & Masini 2011). These situations lead to the overproduction of goods that cause a negative externality and an underproduction of goods that cause a positive externality (Williams, Swenson, and Lease, 2001).…”

“…These situations lead to the overproduction of goods that cause a negative externality and an underproduction of goods that cause a positive externality (Williams, Swenson, and Lease, 2001). Because prices do not maximize social surplus in these situations, Pigou argued that the government was justified in intervening by taxing the negative externalities and subsidizing the positive externalities in order to align social value with prices facing individuals in the market (Caldari & Masini 2011).…”