> pricing in externalities .. would lead to ... reduction in satisfaction [for those paying] I agree with everything you said and would add > That's not bad

> pricing in externalities .. would lead to ... reduction in satisfaction [for those paying] I agree with everything you said and would add > That's not bad though Of course people who aren't paying something would rather not pay it. In the case of externalizing those costs, they're getting an effective subsidy from society at large for something they disproportionately participate in! I think the complaint about induced demand for roads is that it induces demand in those who have the means and motive to drive. The land those roads are on (and the environment the cars may pollute) is also demanded for other uses like green space or railway or housing. It's a rivalrous finite resource and the part of society that doesn't benefit from more roads may be the larger part.