WITHIN the past fifteen years economists have done considerable theoretical and empirical work on the topic of externalities (also termed spillovers, neighborhood effects or social costs), which are said to exist when the utility or costs of one individual or firm are dependent upon, or affected by, the activities of other individuals or firms. In the terminology of the economist, externalities reflect interdependent utility or production functions in which the utility or costs of one economic or political entity affect the utility or costs of another economic or political entity.' Many of the current social issues such as environmental control and poverty-and indeed most issues of topical interest-are practical manifestations of the pervasive existence of externalities. However, externalities, under the rubric of social costs, were discussed by economists almost a century ago. In fact, this is one of the few areas in which economic analysis has preceded public concern and, unfortunately, the wide divergence which exists between analysis and practice might be a negative testimonial to the "persuasive" powers of intellectual discussion.