Internalisation of externalities: A market mechanism rather than bureaucratic regulation

One of the key roles of economic policy is to internalise externalities. But this can be done in two ways: either through a comprehensive market mechanism or through a proliferation of regulations. Let us give some examples: The climate externality can be corrected either through a market mechanism (a sufficiently high price of CO 2 ), or through a multitude of sectoral regulations (on transport, construction, car emissions, building insulation, industrial standards, etc.) that will no longer be homogeneous; The labour market externality linked to redundancies can be corrected either through a market mechanism, a bonus / penalty on social contributions, or through government approval for each corporate plan to adjust employment; The positive externality linked to research can be internalised by a market mechanism (for example the research tax credit in France) or by public aid for research in sectors or companies that are chosen by the government. The market mechanism is each time simpler and more effective than a regulatory intervention by the government, which is inevitably complex and bureaucratic.