"In economics, an externality (or transaction spillover) is a cost or benefit, not transmitted through prices,[1] incurred by a party who did not agree to the action causing the cost or benefit. The benefits of externalities, in this case, is called a positive externality or external benefit, while its cost is called a negative externality or external costs." (http://en.wikipedia.org/wiki/Externality)
Externality is often a great concern in economic development planning. Either positive externality or negative externality, it affects the social welfare. Therefore, planning and public policy of goverments try to internalize externality to achieve optimal social welfare status.
No comments:
Post a Comment