externalities

(NOTE TO READERS: An expanded, footnote-filled version of this article is online at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1632935 )

Externalities are costs (or benefits) imposed on third parties by another individual’s voluntary action.  Government regulations exist at least partially to protect us from externalities created by others.

One justification for municipal minimum parking requirements is the danger of “spillover parking”: the fear that if Big Brother does not force businesses to build huge parking lots, that business’s customers will “spill over” into neighboring businesses or residential neighborhoods, thus reducing the parking available to the latter group.  For example, if Wal-Mart doesn’t build a thousand parking spaces, maybe Wal-Mart’s customers will park at Mom’n’Pop Groceries down the street, thus reducing the parking available to Mom’n’Pop customers.