Positive externalities – or why everyone should dig up their front drives and plant flowers

Today a mother and toddler came into our front garden to sniff the herbs, look at the flowers and enjoy the bees.  Economists call this a ‘positive externality’.  A ‘negative externality’ is when someone produces lots of nasty pollution which affects other people but not the polluter, so the polluter doesn’t have to pay for it.  But a positive externality is when someone plants lovely flowers in their front garden and other people benefit from it too.  Economists think this is a terrible waste:  I should keep the pleasure that I have paid for (or worked for) to myself and not share it with the world.  Economics cannot deal very well with this kind of thing.  But of course I do benefit from knowing that two other people enjoy my flowers and from knowing that they probably wouldn’t have had the same pleasure from looking at a car park.

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