I think you missed my point. Your example and others are a clear demonstration of how externalities cause individual incentives to lead to a sub-optimal outcome

I think you missed my point. Your example and others are a clear demonstration of how externalities cause individual incentives to lead to a sub-optimal outcome - that is not in dispute. What I was saying is that just because markets are bad at solving a problem does not mean that government is good at solving that problem. It doesn't even mean that government isn't worse at solving it.