Aug 10, 2025 · What Is an Externality? An externality occurs when an activity by one party causes a cost or benefit to another party. These effects can be either negative or positive.

The concept of externality was first developed by Alfred Marshall in the 1890s [1] and achieved broader attention in the works of economist Arthur Pigou in the 1920s. [2] The prototypical example of a …

Externalities occur when producing or consuming a good cause an impact on third parties not directly related to the transaction. Externalities can either be positive or negative. They can also occur from …

What is an Externality? An externality is a cost or benefit of an economic activity experienced by an unrelated third party. The external cost or benefit is not reflected in the final cost or benefit of a good …

4 days ago · What Is an Externality? An externality is a cost or benefit that is caused by one party but financially incurred or received by another. Externalities can be negative or positive. A negative …

Dec 5, 2025 · An externality is an unintended side effect of economic activity that impacts someone not directly involved in the transaction. Think of it as a spillover effect where consequences extend …

Some argue that wealth itself has an externality: inflaming envy. Others maintain that there are externalities of altruism—when I give money to help the poor, everyone else who cares about the …

Consumption, production, and investment decisions of individuals, households, and firms often affect people not directly involved in the transactions. Sometimes these indirect effects are tiny. But when …

Oct 6, 2024 · Externalities are costs or benefits arising from an economic activity that affect third parties who are not directly involved in the activity. These unintended side effects can be either positive or …

An externality occurs whenever the activities of one economic agent affect the activities of another agent in ways that do not get reflected in market transactions.