> Btw, that's not an externality. That's just a regular cost. It can be either or both. Information discovery can simply be a cost of transaction, sure, fine.

> Btw, that's not an externality. That's just a regular cost. It can be either or both. Information discovery can simply be a cost of transaction, sure, fine. Find out about the stuff you're thinking of buying. Regular transaction cost. Where there are markets and methods of transacting in those markets where one can assume the product that was being sold previously with a given name is precisely similar to the one being sold when you want to buy it there is some information acquired without additional cost. If it becomes more popular for some market participants to start messing with that such that everyone has to double check everything all the damn time even when purchasing from people who would not tolerate selling like that because of the uncertainty that is now in the marketplace. That is clearly a cost imposed on people not involved in those messed up transactions. The honest sellers have an additional cost to demonstrate they aren't crooks. The buyers have an additional cost to find that out. The sensible buyer buys from the honest seller with an additional transaction cost that has nothing to do with a change in policy or behavior of either party, it's a result of some other transaction they were not party to and had no control over. That's an externality. One usually enforced via social norms first ("I've come back because you lied to me!" - we've all seen someone, somewhere taking out their fury like that) and regulation second (because yelling at shop attendants is a rubbish thing to do). Pretty sure such externality, while undesirable in itself, does not render useless all the benefits of a marketplace. The idealised form of the microeconomic model known as "perfect competition" has perfect information as an assumption. As soon as you apply the model to a real market that assumption has to be somewhat relaxed. The relaxation may make little difference (eg there's not much to know, it doesn't change much and we all basically know it) or an immense difference (eg insider trading on the stock exchange). Such models are for positive economics (describing what is happening) rather than being prescriptive about what should happen (normative economics). I hope explaining the jargon doesn't come off as being a condescending idiot here. The jargon is used for gatekeeping in many of these discussions and it bothers me that this is how it works.