For those of you looking for an example of a trans-boundary externality--that is, a bad thing that crosses town, state, or country lines--I give you the Celebrated Belching Bog of Bergen** County:
Across the length and breadth of Manhattan, people were asking, "What's that smell?" after a pungent odor like natural gas or rotten eggs blanketed the borough and northern New Jersey for three hours yesterday morning.
By evening, the answer seemed to be a stinky gas emitted by a New Jersey swamp or marsh.
Apparently, NYC emergency operators were swamped--teehee--with phone calls, bogging down--teeheehee--emergency workers. So who pays? Not the creator of the smell (NJ), but the victims (NYC). Do officials in NJ have incentive to pay the cost of passing the gas to NYC? Nope. That's what makes it a trans-boundary externality.
*I'm tempted to apologize for potty humor, but I can't even take credit for the joke. That credit goes to none other than the Honorable Michael Bloomberg, Mayor of New York City: "People should do their best to ventilate, open windows or turn on any fans until this gas passes."
**I'm not sure if the bog is in Bergen County, but I liked the alliteration.
