välisteffektide

Välisteffektide, a term derived from Estonian, refers to externalities in economics. These are costs or benefits that affect a third party who did not choose to incur that cost or benefit. Externalities can be either positive or negative.

Negative externalities occur when the production or consumption of a good or service imposes a cost on a third party. A classic example is pollution from a factory. The factory owner benefits from production, and the consumer benefits from the product, but the surrounding community suffers from the negative health and environmental impacts of the pollution, which are not reflected in the market price of the goods produced. Other examples include noise pollution and traffic congestion.

Positive externalities, conversely, occur when the production or consumption of a good or service creates a benefit for a third party. Education is a common example; an educated individual not only benefits themselves but also contributes more to society through innovation, civic engagement, and a more productive workforce. Public health initiatives, such as vaccinations, also create positive externalities by reducing the spread of disease to the wider population.

Governments often intervene to address externalities. For negative externalities, policies like taxes on polluting activities or regulations on emissions aim to internalize the external costs, making producers and consumers account for them. For positive externalities, subsidies, tax credits, or direct provision of the good or service can encourage its production or consumption, thereby promoting the external benefits. Understanding and addressing externalities is crucial for achieving economic efficiency and social welfare.