 The ability of markets to deliver efficient outcomes when the goods in question are private goods has seldom been questioned by their critics. But even friends of markets admit that they do not lead to efficient outcomes in cases of "market failure", specifically when there are external effects or public goods. External effects are effects on third parties that are not captured in property rights, for example air pollution or CO2 emissions. Public goods are goods that are non-excludable (it is not possible to effectively exclude individuals from their use) and non-rivalrous (the possibility of use by one individual does not reduce the possibility of others using it) (see Mas-Colell/Whinston/Green 1995, ch. 11). An example for a public good is public security: if it is provided, individuals cannot be excluded from it, and the fact that more individuals enjoy it does not reduce its value for others. Therefore, no individual has sufficient economic incentives to provide it; it has to be provided by the state. Critics of markets often hold that situations that include external effects or public goods are much more widespread than defenders of markets admit, including not only environmental but also social problems. With regard to externalities, economists often point to Coase’s famous theorem that holds that when there are no transaction costs, problems of externalities can be overcome through bargaining, independent of the initial distribution of property rights (1960). In reality, however, transactions are often extremely difficult and costly, especially when multiple agents with differing interests are involved. This makes the applicability of this theorem – and hence the defense of market solutions in such cases – problematic. Another problematic case is that of “positional goods” (Hirsch 1976), i.e. goods the value of which depends on their relative position in comparison to what other have. A case in point are expensive houses that people desire for the sake of their status rather than their intrinsic qualities: they want to have a house that has a certain size relative to the houses of others. Positional goods are scarce by definition: only 10% of houses can be in the top 10% of the market. Competition for them is thus a zero-sum game: it is a “rat race” in which everyone keeps the same relative position if everyone moves up by the same amount. This is why some theorists argue that the externalities caused by this kind of competition justifies regulatory measures (see e.g., Frank 2005; for a discussion of positional goods from an egalitarian perspective see also Brighhouse &amp; Swift 2006, for an account in terms of recognition theory see Claassen 2008).