Externalités

Externalités, also known as externalities, are side effects of an economic transaction that affect a third party who is not directly involved in the transaction. These effects can be either positive or negative. Positive externalities occur when the consumption or production of a good or service creates a benefit for others. For example, a homeowner who maintains a beautiful garden can increase the property values of their neighbors, a positive externality. Similarly, research and development in one company can lead to innovations that benefit other firms and society as a whole.

Negative externalities, on the other hand, occur when the consumption or production of a good or service imposes a cost on others. Pollution from a factory is a classic example of a negative externality, as it harms the health and environment of nearby residents without compensation. Another example is traffic congestion, where each additional driver on the road slows down all other drivers.

Because externalities are not reflected in the market price of the good or service, they lead to market inefficiencies. In the case of negative externalities, too much of the good or service is produced and consumed from a societal perspective. For positive externalities, too little is produced and consumed. Economists often suggest various policy interventions to address externalities, such as taxes or subsidies, regulations, or the creation of property rights, to encourage parties to internalize these external costs or benefits.