External effect (also ) one calls the effect of an activity (production, consumption) in the political economy on third, which is not compensated. Negative external effects are called external costs and positive as external use. It means external with the fact that a damage does not receive a remuneration and a beneficiary does not have to pay a return, without having to be obligatorily its conscious.

Intrapersonell

The term intrapersoneller external effect designates learning effects, which have as a consequence in the economics that a person judges the consumption of a property because of lack of information before the consumption differently than thereafter because the consumption causes a change of the preferences.

Here refers "„externally "“to "„outside of the period of computation "“.

As example of a intrapersonellen external effect a drug dependence can be called, if the danger of a dependence does not admit before were.

The term external effect designation in the economics the effects of decisions of a person on the income distribution between persons, on whom third concerned do not have influence, however by the price system to be seized.

Here refers "„externally "“to "„the absence of participation possibilities "“.

As example of a external effect, losses of profit are to be called with a person by the demand structural change with another person. Concrete example: By the offer of a cheap offerer the profit of other enterprises becomes more gesenkt.oder: The of China after steel, due to the rapid economic growth, verknappt and raises the price of iron.

Contrary to technological pekuni¤re works directly in the offer and demand curves of the market and also is therefore independently internalisiert. The market failure by the external effects (positive or negative) is thus eliminated from the outside without interferences by the market.

Technologically

The theory of the technological external effects plays among other things with the economiceconomics view of environmental pollution (environmental economics) in form of the negative external effects arising there a prominent role (see environmental policy). Here market failure arises. As not less importantly also the positive external effects are to be called in particular the basic research, with which national research subsidies can be legitimized. Although perhaps the interpretation of basic research applies as public property in this case still better.

Technological (positive or negative) works in production and use functions of the enterprises and households and causes market failure. In order to achieve efficient resource allocation and outputs, must be intervened from the outside in the market, in order to internalisieren the technological

External costs are costs, which are settled not by the causer, but by others. Usually is responsible at least in parts of the taxpayers for it. External costs represent the negative part of the external effects. An external use is present if the causer (the external use) does not come into the benefit of the complete use.

Negative external effect

External costs result particularly in the energy and traffic sector. In traffic the situation presents itself as follows: Each traffic capacity covers a certain use (usually reaching a goal) and costs. These costs and/or the use result however not completely with those, which take the traffic capacity up (traffic users). Some these costs other persons and/or the entire society are charged. One can therefore between "„the internal "“or private cost, which are borne by the person taken part in the traffic capacity (e.g. Expenditure of time, vehicle and fuel costs) and "„the external costs "“(the cost, which are borne by other one, e.g. road construction and - maintenance, subsequent costs of waste gas emissions) differentiate. The sum of both cost categories is called "„social costs "“. Negative external effects do not develop then, if the well-being of an individual is impaired by the activities of another individual, that these "„side effects "“with its decisions considered.

Positive external effect

Third profiting from an external use are called also free riders, since they use a property, without paying for it. Thus the use of a perfume (often) has pleasant and therefore use increasing effect on other one, we expects however no monetary remuneration for it. Also for example the calling of a telephone call arrives the benefit of free communication, a condition, which was arranged likewise explicitly in such a way.

A positive external effect does not lead however "„welfare-technically "“also to an optimal distribution. Because activities, which cause a positive external effect, are normally accomplished in to small measure. A company, which accomplishes research and development and which also publishes results, has thereby even a profit, other companies profit however likewise from the increased knowledge. Therefore it can be accepted that without appropriate promotion researches too little and one develops. The costs of a positive external effect can become balanced e.g. by subsidization.

Strategies and instruments

The economic problem of the external effects lies in the fact that the causers of the external effects do not consider these in your economic calculation. Without state intervention in case of negative external effects totalsocial costs are thus caused, since they are not considered by the Entscheider and/or in case of positive external effects totalsocial use do not cause, since the Entscheider would not profit from them. Both is not desirable from welfare-economic view and leads therefore frequently to national interferences.

For the prevention of external effects several possibilities stand for order, whereby the best solutions are reached by a Internalisierung, thus an inclusion of the external effects into the market happening.

External effects can be reduced by measure retaining appeal (moral persuasion).

In addition, general rules can be set up, which lead by a negotiating barness of the vested titles to a Internalisierung. This solution relies on the Coase theorem. An example for this is the emission right trade. Another solution plans to let the cling.

Also possibilities for an intervention exist: So external effects could be reduced by national supply or be imposed by the state of requirements, prohibitions and editions. Taxes and subsidies are a further means, whereby the Pigou tax with its internalisierenden effect is to be called here likewise like the price standard practice. So the truck duty under the aspect of the Internalisierung of external costs can be e.g. regarded. Also certificates can reduce the effects of external effects.

Examples

Accompanying table is to give examples of a number of possible external effects.

Example: A craftsman implements a repair work in a dwelling. The following persons are of it concerned:

• the housing owner (related to the transaction it profits in form of a positive internal effect),
• the woman of the housing owner (positive external effect),
• the developing noise disturbs the neighbour (negative external effect).

A national interference could take place in this case via the remuneration of the neighbour, so that it is compensated for the suffered negative external effect. At the same time the wife could be obligated to make for the acquisition of the external use a contribution.

See also

• Precaution for existence
• Causer pays principle

Articles in category "External effect"

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