The article is devoted to the main points of discussion of the two most important fundamental areas of economic thought – Economics of Welfare and institutionalism - on the internalization of externalities. The relevance of the topic is due to the huge dependence of the effectiveness of government regulatory measures aimed at reducing environmental damage, ensuring environmental safety and maintaining sustainable development on the effectiveness of the system of internalization tools. The purpose of the study is to analyze and summarize the scientific views of A.Pigou and R.Coase on the issue of a principled approach to the regulation of externalities in order to develop an effective system of intensification. To achieve this goal, the following tasks were solved. The theoretical and methodological foundations of the problem of external effects were considered. The essence of A.Pigou’s principled approach to their regulation was characterized. The alternative approach of R.Coase was analyzed. Coase’s approach to solving the problem of externalities. Comparison criteria are identified and a comparative analysis of the two approaches is carried out. Their conceptual differences, limitations, as well as the conditions under which each of them can be most effective are identified. The scientific paradigms of the Economics of Welfare and the institutional theory of the problem of regulating externalities demonstrate both similarities and differences. The commonality of positions is manifested in the recognition of the fact that the possibility of internalization by adjusting marginal private costs, taking into account the external effect, is largely due to government actions. The differences relate to ideas about the tools of state regulation of external effects. While proponents of Economics of Welfare emphasize fiscal methods (taxes and subsidies), representatives of institutionalism insist on minimizing the direct involvement of the state, reducing its role to a clear specification and protection of property rights, which creates the basis for an effective solution of the problem through the use of market mechanisms. The scope of the research results lies in the field of economic theory, the history of economic studies, environmental economics and environmental management.
I. A. Shekhov (Sat,) studied this question.