One diagram reduces all of politics to four cells. Three of them say: do nothing.
Two binary questions produce four cells: does the activity impose a net wealth loss on external parties (ΔW_ext < 0)? and is the brake cost-effective (brake cost ≤ |ΔW_ext|)? Three of the four cells tell government to do nothing. Only the cell where external parties lose wealth on net AND the brake is cost-effective gives government objective standing to act. This is a much narrower licence than 'whatever the median voter wants' and a much wider one than 'government should never act'.