I have two points on externalities.
"Along the way, Rodrik argued, to my surprise, that starting a new venture in a poor country has a positive externality that leads to market failure. He gave the example of a call center–suppose a country has a work force that would be good at working in call centers. An entrepreneur who starts a call center will thereby provide information to other entrepreneurs about the quality of the work force."
Pigou meets Kirzner. It would be a productive meeting, but I'm afraid there would be a lot of resistance, at least from modern proponents of Kirzner. Information asymmetries in hiring are very well understood - the step that I haven't heard anybody take that Rodrik takes here is to point out that because information is welfare-enhancing in labor markets with asymmetric information, entrepreneurs who hire in these markets (providing information on the wage and skill distributions of the population) generate positive externalities for other entrepreneurs.
My other point is to note that I've started writing a short article that I want to submit to a journal called Space Policy on the (mis)use of externalities to justify NASA. NASA's heart has been in the right place in their self-justification to the public. For a very long time they've touted their "spin-offs" - NASA technology that is useful in the private sector. They even have a regular publication dedicated exclusively to featuring these spin-offs, which has covered something like 1,600 spin-offs to date (and they note that this is not exhaustive). The effort is well-intended, but this is not really an externality - or if it is an externality ("information goods" like technology are so strange it's hard to think about them in the same way as non-information goods), it only scratches the surface of the externalities that NASA addresses. I plan on going over three more traditional externalities of public space exploration that NASA does not talk about as much as spin-offs, but should to provide what economists would consider a legitimate justification for public provision of space exploration. The articles in this journal are shorter than in others, so hopefully I'll be able to wrap it up in the next couple weeks (depending on other workloads). And sorry Evan - I know you'll be disappointed to learn its an Elsevier journal.
But for this morning - time to write more about the engineering labor market.