POSITIVE EXTERNALITIES Meaning and
Definition
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Positive externalities are economic benefits that are experienced by third parties who are not directly involved in a transaction or activity. These external benefits are generated when the actions of one party result in an improvement in the welfare or well-being of others in the society. They occur when the social benefits derived from an activity exceed the private benefits received by the individuals who engage in that activity.
Positive externalities can occur in various contexts, such as the production or consumption of goods and services. For instance, the production of education leads to positive externalities because individuals who are educated contribute to a more productive and knowledgeable society. This benefits society as a whole, as it leads to economic growth and innovation.
Similarly, when a person gets vaccinated against a contagious disease, the positive externality arises as it not only protects the individual, but also prevents the spread of the disease to others. This results in a healthier population and reduced healthcare costs for society.
Positive externalities can also be observed in environmental preservation efforts, where individuals or organizations invest in conserving natural resources or maintaining biodiversity. This benefits future generations by ensuring the sustainability and resilience of ecosystems.
In summary, positive externalities refer to the positive spillover effects that benefit third parties or society as a whole, resulting from economic activities or individual choices. They highlight the social value that extends beyond private interests.
Etymology of POSITIVE EXTERNALITIES
The term "positive externalities" is a combination of multiple words with their own etymologies. Let's break it down:
1. Positive: The word "positive" originates from the Latin word "positivus", which means "placed" or "set in position". It is derived from the verb "ponere", meaning "to put" or "to place". Over time, "positive" evolved to imply something definite, real, or affirmative.
2. Externalities: The word "externality" comes from the Latin word "externus", meaning "external" or "outside". It is derived from the noun "exter", which means "the outside" or "the outer side". The suffix "-ity" is used to turn the noun "external" into the abstract noun "externality".
