Externality
In economics, an externality is a cost or benefit to an uninvolved third party that arises as an effect of another party's activity.
At a glance
Key signals
0% cross fields · reaches 1 more
- Economics
- Ecological Economics
- Explanation
- Examples
- Misconception
- Sourced relations 2
- Attribution
Dependencies
What this concept builds on and what it makes possible — derived from the atlas’s dependency, causal and structural relations, not from every related edge.
Foundations · builds on
ExternalityrequiresEnvironmental valuationEstablished
Open Environmental valuation →
Externality requires Environmental valuation.
Enables · leads to
ExternalitycausesMarket failureEstablished
externality causes market failure.
Mechanism: An externality causes market failure: when a cost or benefit falls on third parties, the market price ignores it and the outcome is inefficient.
- Wikipedia (English & German editions) verifiedmoderate evidence
System context
Subsidyis aExternalityEstablished
subsidy is a kind of externality.
Mechanism: Subsidies are often used to correct externalities — paying for an activity whose social benefits (like clean energy) exceed its private returns.
- Wikidata verifiedmoderate evidence
Structural role & consequence
Interpreted from the current atlas graph — what the connections mean, not just how many there are.
Directly enables 1 concept; following enables/causes relations, 1 concept is downstream across 2 disciplines.
structural · Follows only enables/causes dependency edges — not general relatedness.
Currently dark in the atlas: no key date stored · 3 of 3 of its relations lack claim-level evidence.
atlas representation · Describes the current Thinking OS representation, not the state of the world.
Builds on 1 foundation (requires / depends-on / derived-from / emerges-from).
structural · Structural graph analysis — not a claim of importance, causation or history.
Exercises 2 annotated mental models — a concept that connects several thinking patterns.
curated · Curated annotations, not a derived measure.
cross-field
3 within-field, 0 cross-field
Strengths & constraints
Constraints
- Evidence coverage currently thin in the atlas — few of its relationships carry claim-level evidence. atlas representation
- No dated history stored — the atlas records no key date for this concept. atlas representation
Conditions
- Its dependency reading rests on 1 foundation relation. structural
- Read structurally — most of its relationships carry no external evidence yet, so claims here are graph-derived. structural
Dependency radial
What this concept builds on (left) and what it makes possible (right) — derived from dependency and causal relations.
Seen through each discipline
How this concept sits in each of its fields — derived from its real connections in the graph, not asserted.
Through this lens it connects to Market failure and Subsidy.
Through this lens it connects to Environmental valuation.
Related ideas to explore
Concepts that look related but are not yet connected here — candidates for a connection to reason about, not established links.
This idea also appears in…
The same structure shows up in other disciplines. These are real recurrences drawn from the graph — a starting point for asking “what carries over, and what changes?”
Cause and effect33 disciplines · 28 concepts
Incentives1 discipline · 1 concept
Concepts
shares a mental model
shares a mental model
shares a mental model
shares a mental model
shares a mental model
shares a mental model
Mental models at work here
Cause and effect
One thing genuinely bringing about another — as opposed to two things merely moving together. Establishing it needs a mechanism and controls, not just a pattern.
Ask: if I changed the cause, would the effect change? And what else might explain the link?
Incentives
Agents respond to costs and rewards; to understand or change a system's behaviour, look at what each part is rewarded for — not what it's told to do.
Ask 'who benefits, and how?' Watch for perverse incentives, where a rule rewards exactly the behaviour it meant to stop.
- Connects 3 other ideas across 2 disciplines.
- Most of its connections are of the “Kind & structure” kind.
- It exercises 2 reusable thinking patterns.
Derived from the graph’s real structure — observations, not a score.
Sources
- Wikipedia (English & German editions) verifiedmoderate evidence
- Wikidata verifiedmoderate evidence
- Externality and Institutions (2001) verified
- Externality or sustainability economics? (2010) verified
- Externality (1979) verified
- Externality (2004) verified