A term that comes to mind when I think of situations like this is "transaction externalities", a character string that retrieves fewer than 100 links via Google. I will boldly and irresponsibly ignore whatever wisdom those links might yield, and instead spit out some thoughts on a  half-baked idea that has been nibbling at me, or vice versa.

Externalities are a standard justification for regulations that tweak or stomp on a market. In the discussions I'm familiar with, however, "externalities" result from actions -- emitting pollutants, creating knowledge, etc. -- but not from market transactions per se. (First problem: How clear is this boundary? Clear enough to be useful, I think). In this category I would like to include the creation of financial instruments, perhaps using the excuse that they are promises of transactions.

The simplest argument for the benefits of trade is that both parties have a (rational?) expectation of gain. The notion of transaction externalities complicates this.

Examples of what I think of as "transaction externalities":

1. The transactions that led to the current derivatives nightmare created systemic risks: These are externalities in that they aren't reflected in the expected benefits to individual buyers and sellers.

2. The purchase of gasoline by a US driver increases US dependency on Middle Eastern oil, and the perceived risks (and responses to them) have engendered enormous costs that are not reflected in the price at the pump.

3. Shopping at a new Walmart, rather than a local or more responsible store, creates costs in the form of economic displacement, loss of valued local institutions, public health care burdens, etc., again not reflected in the immediate costs seen by the transacting parties.

Example (3), however, points to "transaction externalities" of sorts that tend to support broad and distasteful arguments against innovation and market adjustment. Somewhere in the implied spectrum of concepts are ideas that smack of sellers having a right to their customers continued business.

Is there a (semi-)coherent idea to be found here? Is there a sound part called "X" in the literature, or a bogus part that is called the "Fallacy of Y"? And what does "transaction externality" already mean, anyway? (I'm too lazy to read about it at the moment.)

Words and ideas I offer here may be used freely and without attribution.