Positive Externalities In Economics

The main idea of externalities in economics refers to the price or advantage that affects a party, organization or an individual who are not directly involved in making use of the price or obtaining the advantages associated with them. With the help of various factors combined there are many deviations in certain economic policies that help address the issue of externalities on the whole. Both negative and positive externalities impact the society in their own way. In economics both the consumption and the production aspects for any factors are essential and thus have to be taken into account. However with the help of various fiscal, monetary and federal policies like subsidy and taxes the government plans to address the important issues of

In one-way or the other the actions of production and consumption affect another firm or organization automatically (Buchanan and Stubblebine 1962). Basically it is a benefit or cost by which someone is affected without directly affecting the production or consumption of a good or service. Neither are any payments made for the benefits nor any compensation for costs. In this case the main causes of externalities are from the lack of property rights, such rights that contain the power to make decisions to earn profits for the firm (Ramello 2011). In the competitive process and market structure changes arise due to property rights; given this opportunity it is easy to exploit and hence it can be easily directed to extract the additional benefits mainly being used strategically by the exclusive rights (Ramello 2011). Externalities can mainly be defined into two major types, positive and negative

Truly it means when the social benefit of anything is greater than its private cost (Parchomovsky and Siegelman 2012). Therefore it is also known as a market success. Political examples can be portrayed in this situation, as nowadays the governments can increase the social benefit by investing and developing in projects that have more social value than its private value. In a way it could be useful for people as it can help them make better choices. Education, waste cleaning industries and transport services could serve as great examples of positive externalities. Clearly these examples mostly portray social benefits that are much higher than the private benefits associated with them. On the other hand as we see the other forms of externalities, we see negative externalities in a market structure. This kind of externality occurs when others who are not involved directly in any activity are affected and therefore have no compensations to pay for the acts through production or consumption (cost bourn by other people not involved in buying or selling) (Nagler 2014). Mostly selective negative externalities and their resulting competitive effects are viewed by compatibility (NAGLER 2011). Consequently negative externalities are also known as market failure. Air pollution, water pollution, noise