Externality

usgb/ˌekstɜːrˈnæləti/
noun

A side effect or result that affects those who did not choose to experience it.

Pollution from factories is an example of a negative externality as it affects everyone, not just the factory owners.
Visual representation of "externality" - A side effect or result that affects those who did not choose to experience it.

Often appears as...

  • negative externality
  • positive externality

Usage tips

Formal

Academic

Definition 1 of 2
Visual representation of "externality"
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Impact Beyond Choice

An externality involves outcomes affecting those who didn't choose to be involved.

Illustration for Impact Beyond Choice
Residents didn't choose the new highway, but noise pollution is an externality they face.
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Not Always Bad

Externalities can be positive, like a park that beautifies the area for all.

Illustration for Not Always Bad
The new park's beauty is a positive externality for the neighborhood.
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Public Policy Relevance

Governments often step in to correct negative externalities through regulations.

Illustration for Public Policy Relevance
To reduce traffic congestion's externality, the city introduced a carpool policy.
Visual representation of the word "Externality"

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