[esafak]

1. If you can price the cost of the externality, you can justify optimizing it.

2. Monopolies and situations with the principal/agent dilemma are less sensitive to such concerns.

[bawolff]

> 1. If you can price the cost of the externality, you can justify optimizing it.

An externality is usually a cost you don't pay (or pay only a negligible amount of). I don't see how pricing it helps justify optimizing it.

[esafak]

You are right. I should say perceived externality; there may be a price that is discounted.