Last year, Frances Homans said this:
Maybe this could go into your "teaching" category. I have students keep a log of externalities, both positive and negative, that they both generate and experience.
Here is the offering for 2013 from Leif Johnson:
My absolute favorite externality is that of smell. This can be good and bad, but while someone is making bacon, I will never object. Though I may not get to enjoy eating the food, it is really hard to contain the smell that is produced. Bread is also high on the list of unintentionally good smells. I have yet to hear of someone disliking the aroma of fresh baked bread.
A poor externality however, can be found quite readily on a public bus. The signs are everywhere, but people just don’t seem to care. Talking on phones is a huge pet peeve of mine, and it can be found everywhere while I am on my morning commute. It wouldn’t be so bad if the people talking would quiet down a bit, but they seem to ignore all other presences while on the talking demon-machine. What’s worse is when the conversation is in another language and the talkers think that because I can’t understand them, I can’t hear them. The opposite is true.
Granted, I give off my fair share of negative externalities as well. My Australian bush hat tends to take up a fair amount of room and may be detrimental to other people’s vision. Generally I don’t notice if my hat is in the way, especially if it is on my head. Walking in crowds can be a hassle. I bet that a whole horde of people behind me would like to see where they are walking, but cannot due to my fantastic hat. I’m sure that I leave it on sometimes when someone would prefer that I didn’t.
As far as positive externalities go, I tend to clean my workspace regularly, which includes kitchen areas. I do not clean other people’s messes directly, but when they cross with mine, they will not be overlooked. So as I finish my regular cooking routine, the kitchen is generally cleaner than when I started. Hooray for positive externalities.
I'm not totally sure, but I think the point is that the mere existence of negative externalities is not justification for government involvement in a market economy.