Concept: externality

An externality is a situation in which the private costs or benefits to the producers or purchasers of a good or service differs from the total social costs or benefits entailed in its production and consumption. An externality exists whenever one individual’s actions affect the well-being of another individual – whether for the better (positive externality) or for the worse (negative externality).

The Chicken Roaster icon

The Chicken Roaster

cost-benefit analysis | externality

The Engagement icon

The Engagement

externality | incentives | property rights

The Good Samaritan icon

The Good Samaritan


The Stakeout icon

The Stakeout

Coase theorem | externality

The Smelly Car icon

The Smelly Car

Coase theorem | externality | moral hazard

The Junior Mint icon

The Junior Mint

externality | unintended consequences

The Marine Biologist icon

The Marine Biologist