Can externalities be corrected without government intervention?
Ronald Coase famously argued that negative externalities can be eliminated through a process of ‘private bargaining’, in which all affected parties, who have various conflicting interests, can negotiate over how to distribute the costs of a plausible and mutually-acceptable solution to the dispute (see Bowles et al., chapter 4)—without ever turning to government. In other words, Coase claims that when faced with negative externalities, our options need not be to either accept these market inefficiencies/failures or to accept the need for government intervention to prevent or correct for these failings. Consider the illustrative example of how American Electric Power and residents of Cheshire, OH reached such a negotiation, as reported by New York Times: 13 May 2002.
Are thinkers like Coase correct: can these sorts of externalities be internalized without government intervention? In answering this question, you can discuss other relevant examples (your focus need not be on the Cheshire case), but you do need to address possible problems with the private bargaining process, and to explain whether these problems can be overcome. For instance, with regard to the Cheshire example, did the decision of residents to sell their properties to AEP and move away solve the externality problem?