Economics
Externalities
Costs or benefits that affect parties not directly involved in a transaction. Negative externalities impose costs on others (pollution); positive externalities provide benefits (education, vaccinations).
Biological Context
Ecosystems are full of externalities. Bees pollinating flowers create positive externalities for plants. Overgrazing by one herbivore degrades habitat for all. Ecosystem engineers like beavers create massive externalities—ponds, wetlands, habitat—affecting countless other species.
Business Application
Markets often fail to account for externalities, leading to overproduction of negative externalities (pollution) and underproduction of positive ones (basic research). Regulation, taxes, and subsidies attempt to internalize externalities into market prices.