What are externalities?

When fishermen catch too many fish, the fish stock becomes depleted and there are no more fish to catch. This is bad for fishermen who lose their jobs, but it can also have wider detrimental effects. We can think of these effects in terms of externalities.

Externalities are consequences of some actions that are experienced by actors who did not have any say in these actions. For example, depletion of fish stocks can cause problems for other organisms that feed on fish, even though it was not their actions that led to the depletion problem. This, in turn, can overthrow whole ecosystems.

In this video, Katarzyna Abramczuk introduces the term externality. She talks about both positive and negative externalities and discusses several examples in which externalities are present.