“An externality is the cost or benefit that affects a party who did not choose to incur that cost or benefit.” (related: tragedy of the commons — “A situation within a shared-resource system where individual users acting independently according to their own self-interest behave contrary to the common good of all users by depleting that resource through their collective action”; free rider problem — “when those who benefit from resources, goods, or services do not pay for them, which results in an under-provision of those goods or services.”; Coase theorem — “if trade in an externality is possible and there are sufficiently low transaction costs, bargaining will lead to a Pareto efficient outcome regardless of the initial allocation of property.”; NIMBY — “Not In My Back Yard”)
Source:
Gabriel Weinberg’s Mental Models I Find Repeatedly Useful
