Editing Externality (section)

==History of the concept==
The term "externality" was first coined by the British economist [[Alfred Marshall]] in his seminal work, "[[Principles of Economics (Marshall book)|Principles of Economics]]," published in 1890. Marshall introduced the concept to elucidate the effects of production and consumption activities that extend beyond the immediate parties involved in a transaction. Marshall's formulation of externalities laid the groundwork for subsequent scholarly inquiry into the broader societal impacts of economic actions. While Marshall provided the initial conceptual framework for externalities, it was Arthur Pigou, a British economist, who further developed the concept in his influential work, "The Economics of Welfare," published in 1920. Pigou expanded upon Marshall's ideas and introduced the concept of "Pigovian taxes" or corrective taxes aimed at internalizing externalities by aligning private costs with social costs. His work emphasized the role of government intervention in addressing market failures resulting from externalities.<ref name="Boudreaux" />

Additionally, the American economist [[Frank Knight]] contributed to the understanding of externalities through his writings on social costs and benefits in the 1920s and 1930s. Knight's work highlighted the inherent challenges in quantifying and mitigating externalities within market systems, underscoring the complexities involved in achieving optimal resource allocation.<ref>{{Cite book |last1=Knight |first1=Frank Hyneman |title=The ethics of competition |last2=Boyd |first2=Richard H. |date=2017 |publisher=Routledge, Taylor & Francis Group |isbn=978-1-56000-955-9 |edition=First issued in hardback |series=Classics in economics series |location=London New York}}</ref> Throughout the 20th century, the concept of externalities continued to evolve with advancements in economic theory and empirical research. Scholars such as [[Ronald Coase]] and [[Harold Hotelling]] made significant contributions to the understanding of externalities and their implications for market efficiency and welfare.

The recognition of externalities as a pervasive phenomenon with wide-ranging implications has led to its incorporation into various fields beyond economics, including environmental science, public health, and urban planning. Contemporary debates surrounding issues such as [[climate change]], pollution, and resource depletion underscore the enduring relevance of the concept of externalities in addressing pressing societal challenges.