[naming_the_user]

The issue with your assessment is that everyone includes the individuals.

The externalities associated with driving are probably -1 utility points for me whereas driving is +20 or even more.

I think that basically what you are saying only makes sense if society includes a bunch of people who do not benefit, when in reality that’s usually a fairly small group (e.g. in the US or UK the small number of homeless).

[NumberWangMan]

I think the whole problem with externalities is that even if everyone gains a private benefit from their choice, you can all be worse off due to the externalities.

To take your example, if you have a society of 30 people, each of whom drives, and gains +20 utility for driving, but -1 for each other car on the road, you get a net utility of -9 per person. But if any individual decides not to drive, their utility drops to -29, even as they provide a total benefit of +29 utility to everyone else by choosing not to drive.

It's obviously a lot more complicated than that. You have local externalities (noise, particulate pollution, health issues due to a more sedentary lifestyle, deaths and injuries due to accidents) and global ones (GHG emissions). Using public transport also subjects people to some negative externalities, if crime isn't controlled enough, or if people are noise. And you don't want a place that makes driving hard, but also has crappy public transit -- though usually, crappy public transit is a symptom of car-centric design, in my opinion.

But I think on balance, places where driving is discouraged in favor of other modes of transport are better off, and especially, a world where private automobiles are rarely used is better than a world where most everyone drives everywhere.