The Bentham-Mill approach culminates in Pigou.
His concern was economic welfare, that part of
welfare that can be brought, directly or indirectly, into relation
with the measuring rod of money.
He asked, when does laissez-faire not
result in maximum welfare? In answering this question he gave us
externalities and public
goods.
one person A, in
the course of rendering some service, for which payment is made, to a
second person B, incidentally also renders services or disservices
to other persons C, D and E, of such a sort that technical
considerations prevent payment being exacted from the benefited
parties or compensation being forced on behalf of the injured
parties.
Pigou (1920)
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