externalities

USAGE SUMMARY

"externalities" is a correct and usable word in written English.
You can use it to describe a positive or negative consequence of an economic activity or situation that affects someone outside of the direct participants. For example, "The externalities of the factory's pollution affected the entire community's health."

✓ Grammatically correct

News & Media

Formal & Business

Science

Human-verified examples from authoritative sources

Exact Expressions

60 human-written examples

We know that when markets are extended they generate what is known as "negative externalities" – damage caused by market behaviour that does not enter into the cost calculations of those producing it.

The Guardian - Opinion

But there are many other less obvious examples of such externalities, such as the anxiety caused to workers' lives by unregulated labour markets, or the general undermining of values and common decency produced by the single-minded concentration on profit maximisation.

The Guardian - Opinion

Proposals for resolving these problems can be brought together under the coherent umbrella of tackling market externalities.

The Guardian - Opinion

Particularly important are externalities where the public damage done undermines the sustainability of business activity itself.

The Guardian - Opinion

A basic function of government is to make people pay for negative externalities.

The Economist

We can be pretty sure that a dollar is worth more to someone who earns $30,000 per year than to someone who earns $3 million.Mr Mankiw's preferred alternative is a "just deserts" theory, in which people should retain the value of their labour beyond whatever is needed to provide public goods and compensate for externalities and market failures.

The Economist

Third, they could split energy used and consumed into separate transactions, meaning that a solar customer sells all his energy to a utility before buying what he needs.Yet those last two proposals leave unanswered the question of what rate utilities should pay customers for their power or more broadly, what the price of solar, with all externalities factored in, ought to be.

The Economist

And there's no question that a system more dependent on taxes on negative externalities is more efficient than one more dependent on taxes on income.

The Economist

This strikes me as a very important point.Because the effects of non-carbon pollutants tend to be more spatially concentrated than the effects of greenhouse emissions, the negative externalities are far more likely to be largely, if not entirely, contained within the responsible sovereign territory.

The Economist

Economics is precise about the tax that should, in principle, be set to deal with negative externalities: the tax on a litre of fuel should be equal to the harm caused by using a litre of fuel.

The Economist

After all, a tax on those negative externalities will reduce their output a little bit, and given the choice between reducing carbon a little bit and reducing income a little bit, wouldn't we prefer to reduce carbon?

The Economist

Expert writing Tips

Best practice

When discussing economic activities, clearly specify whether you're referring to positive or negative "externalities" to avoid ambiguity. For instance, mention 'positive network externalities' or 'negative environmental externalities'.

Common error

Avoid using "externalities" to describe direct impacts. "Externalities" are indirect effects on parties not directly involved in a transaction. Use "impacts" or "effects" for direct consequences.

Linguistic Context

The primary grammatical function of "externalities" is as a noun, referring to the costs or benefits of a transaction or activity that affect a third party who did not choose to incur those costs or benefits. Ludwig AI confirms its correct and usable nature in written English.

Expression frequency: Very common

Frequent in

News & Media

35%

Formal & Business

30%

Science

25%

Less common in

Encyclopedias

5%

Wiki

3%

Reference

2%

Ludwig's WRAP-UP

The term "externalities" refers to the indirect costs or benefits resulting from an activity that affects a third party. As confirmed by Ludwig AI, it is grammatically correct and frequently used, particularly in economics and environmental contexts. This analysis reveals that "externalities" appears most often in news media, formal business communications, and scientific publications, highlighting its relevance in discussions concerning economic impacts, policy decisions, and social consequences. To enhance clarity, specifying whether you're referring to positive or negative "externalities" is crucial. Common errors involve confusing "externalities" with direct impacts, underscoring the importance of understanding its meaning for effective communication.

More alternative expressions

Phrases that express similar concepts, ordered by semantic similarity:

spillover effects

Focuses on the indirect effects of an action, especially unintended ones.

unintended consequences

Highlights the unplanned results of actions, which can be positive or negative.

ripple effects

Suggests a cascading series of consequences stemming from an initial action.

indirect impacts

Emphasizes the secondary or less obvious effects of a decision or event.

knock-on effects

Implies a chain reaction of consequences, where one effect leads to another.

side effects

Similar to spillover effects, but often used in a medical or technological context.

consequential impacts

Highlights the significance and far-reaching nature of the effects.

ancillary effects

Focuses on effects that are supplementary or secondary to the main action.

downstream impacts

Suggests that the consequences are felt later or further removed from the initial cause.

collateral effects

Highlights unintended or indirect damages that can occur.

FAQs

How are "externalities" typically corrected in economics?

Economists often suggest correcting for "externalities" through mechanisms like Pigouvian taxes (to discourage negative externalities such as pollution) or subsidies (to encourage positive externalities such as education).

What are some examples of negative "externalities"?

Common examples of negative "externalities" include pollution from factories, noise pollution from airports, and the health impacts of second-hand smoke. These impose costs on individuals not directly involved in the activity.

How do positive "externalities" benefit society?

Positive "externalities" create benefits for third parties. Examples include increased property values near well-maintained parks, the benefits of herd immunity from vaccinations, and the spread of knowledge from research and development.

What's the difference between "externalities" and public goods?

"Externalities" are side effects of production or consumption that affect third parties, while public goods are non-excludable and non-rivalrous, meaning they are available to everyone and one person's use doesn't diminish availability for others. Public goods often require government provision due to market failure.