One public good in my community is represented by energy-efficient LED streetlights anticipated to last for more than a decade and resolve low visibility for driving. Similar to other public space products, the selected good does not exist without unpaid indirect benefits/costs. Also known as externalities, these unpaid factors result from the product’s interaction with the neighboring communities, society, and the environmental system and illustrate the market efficiency hypothesis’s limitations.
On the supposition that factual luminance levels slightly exceed the optimal ones, the negative externalities or unpaid costs might include accident risks from drivers’ visual discomfort, as well as community members’ retinal cell loss and the increased risks of myopia. The health effects of sleep irregularities from light pollution, the release of carbon dioxide into the atmosphere, and the global consequences of insect populations’ disrupted feeding and migration patterns are other possible externalities. The indirect benefits might also be present, including enhanced road visibility for non-members who enter the community, thus gaining access to the service without paying for it.
Concerning the market efficiency paradox, the market is theorized to make prompt price-related decisions and immediately reflect value data in prices. In the case of streetlight manufacturing companies and installation contractors, if everyone assumes that the market is already efficient, companies and regulatory bodies will stop researching the product’s indirect effects and collecting information, thus undermining the market’s efficiency. As shown above, the real world consists of endless interactions that might alter the good’s perceived value. Importantly, in this case, consideration should be given to situational externalities that depend on the product’s installation details and the community’s physical surroundings, flora, and fauna. The belief that LED street lights’ prices reflect the available information perfectly does not consider such information’s amenability to change and the need for research to find satisfactory solutions to the negative externalities, such as the light pollution tax.