You know the concept of externalities, and more specifically, the negative kind? That's where private transactions produce side effects that have a negative impact on others. The classic example being a factory emitting pollutants into the environment while producing goods for sale. Economists say that because the market does not price externalities correctly - the factory gets to pollute for free - the government should then step in and impose a cost through regulation, fines, or an emissions trading scheme. In theory, this is all fine.

My question is, is there any point at which an externality becomes too small or unimportant to be worth regulating? Or where regulation of an externality impinges on other things that society also values, such as freedom? If you think about it, most things that you do have an effect on others down the line.

If I am a smoker, I can say that I have the right to poison myself if I want, but even if you stop me from inflicting my second-hand smoke on others, when I die prematurely of emphysema I'll burden the health care system and deprive the economy of my years of productivity. I can say that I can eat all the donuts I want, but when I get diabetes, I'll drive up everybody's insurance premiums. If I paint my home a shade of obnoxious orange and plant ugly plastic flamingoes on my unkempt lawn, that will have a negative effect on the property prices of the surrounding houses. If I dress in a manner that others find hideous or offensive, then I have negatively affected their enjoyment of the public space that we are sharing.

How do you decide when an externality is worth regulating?

First it helps if there is an actual consensus, what is a negative or positive externality. With dress codes and the looks of houses, there usually is a majority opinion but not really a broad consensus. Individual cummunities do have regulations, how houses may look and there are indecent exposure laws, so thoose are not really absurd examples.

Personally i would abolish all indecent exposure laws and similiar but there i have a minority opinion. I also believe that at least in Austria regulations about houses tend to be too strict, but i recognize that in some cases preserving a view has much effect on tourism, and thus there is reason for some regulation, so my disagreement is in quantity not so much in quality.

Calculations on the costs of illness due to unhealthy lifestyles seem quite fishy and often dishonest. Healthier people tend to get retirement payments longer and then get ill anyway, so on a purely ecconomic basis, it is preferable if people die quickly immediatly after retirement. You should encourage duelling clubs for seniors or something then.

Throwing out pollutants, that are a byproduct of your activities (be it smoking or running a factory), are generally agreed to be negative, there is only a disagreement as to how negative and there are occasional claims, that they also have unpaid positive sideeffects as well.

I would be leery of making externalities too broad a category; to some extent, they just have to come down to the cost of allowing people to go about their lawful business. Clearly when an identifiable physical harm is imposed on an individual (or group) by an activity then there should be regulation; but one could limit or forbid just about anything if the trigger is imposing any inconvenience or cost at all on someone not party to the original activity. Some kind of balance would be needed here.