Positive Externality

A Positive Externality is an externality that provides a positive effect/external benefit on a third party.

• Context:
  • It can (sometimes) be a positive effect on a Shared Resource.
• Example(s):
  • creating a publicly displayed Beautiful Item.
  • Vaccination.
  • a beehive pollinating a nearby fruit field.
  • …
• Counter-Example(s):
  • a Negative Externality.
• See: Education, Productivity, Network Effect, Exogenous Growth.

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References

2014

• (Wikipedia, 2014) ⇒ http://en.wikipedia.org/wiki/externality#Positive Retrieved:2014-8-3.
  • A positive externality (also called "external benefit" or "external economy") is an action of a product on consumers that imposes a positive effect on a third party.

    Examples of positive externalities (beneficial externality, external benefit, external economy, or Merit goods) include:

    • Increased education of individuals can lead to broader society benefits in the form of greater economic productivity, a lower unemployment rate, greater household mobility and higher rates of political participation.
    • A beekeeper keeps the bees for their honey. A side effect or externality associated with such activity is the pollination of surrounding crops by the bees. The value generated by the pollination may be more important than the value of the harvested honey.
    • An individual who maintains an attractive house may confer benefits to neighbors in the form of increased market values for their properties.
    • An individual buying a product that is interconnected in a network (e.g., a video cellphone) will increase the usefulness of such phones to other people who have a video cellphone. When each new user of a product increases the value of the same product owned by others, the phenomenon is called a network externality or a network effect. Network externalities often have "tipping points" where, suddenly, the product reaches general acceptance and near-universal usage.
    • In an area that does not have a public fire department, homeowners who purchase private fire protection services provide a positive externality to neighboring properties, which are less at risk of the protected neighbor's fire spreading to their (unprotected) house.
    • An individual receiving a vaccination for a communicable disease not only decreases the likelihood of the individual's own infection, but also decreases the likelihood of others becoming infected through contact with the individual.
    • A foreign firm demonstrates up-to-date technologies to local firms and improves their productivity.
  • The existence or management of externalities may give rise to political or legal conflicts. Collective solutions or public policies are sometimes implemented to regulate activities with positive or negative externalities.

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