Dryland salinity has been conceived of as a problem involving massive off-site impacts and therefore requiring coordinated action to ensure that land managers reduce those off-site impacts. In economic terms, salinity is seen as a problem of market failure due to externalities, including external costs from one farmer to another and from the farm sector to the non-farm sector. In this article, we argue that, at least in Western Australia (WA), externalities are much less important as a cause of market failure than has been widely believed. If all externalities from salinity in WA were to be internalised, the impact on farm management would be small.