Such a restricted view of social innovation is, of course, not what the authors intend. They offer additional resolution in their definition of social value: “The creation of benefit or reductions of costs for society—through eff orts to address societal needs and problems—in ways that go beyond the private gains and general benefi ts of market activity.” The operative concept here, and the real diff erentiation from Barro’s view, is the reference to benefi ts that “go beyond
… market activity.” This phrase directs us to the Achilles’ heel of
Barro’s otherwise seemingly solid analysis. Barro knows that markets
for many goods are imperfect or nonexistent. As a consequence of
incomplete markets, the value of trade between two individuals in
many cases will not refl ect impacts on third parties. Such impacts
are termed “externalities” by economists, capturing the idea that
signifi cant costs or benefit of a transaction are “external” to the
parties directly involved in making the deal