In economics, a side effect of an activity that affects other people who did not choose to be involved, such as pollution or neighborhood safety. It can be positive (a benefit) or negative (a cost).
From *external* plus the noun suffix *-ity*, meaning a state or quality. It names the quality of being external to the main transaction or decision.
Externalities are the ‘hidden ripples’ of our actions—costs or benefits that spill over onto bystanders. A classic example is a factory that makes profits for owners but smoke for everyone else; the smoke is an externality that doesn’t show up on the price tag.
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