Editing Environmental economics (section)

=== Externality ===
An [[externality]] exists when a person makes a choice that affects other people in a way that is not accounted for in the market price. An externality can be positive or negative but is usually associated with negative externalities in environmental economics. For instance, water seepage in residential buildings occurring in upper floors affect the lower floors.<ref>Rita Yi Man Li (2012), The Internalisation Of Environmental Externalities Affecting Dwellings: A Review Of Court Cases In Hong Kong, Economic Affairs, Volume 32, Issue 2, pages 81–87</ref> Another example concerns how the sale of Amazon timber disregards the amount of carbon dioxide released in the cutting.<ref>{{Cite news|title=Environmental degradation replaces classic imperialism|last=Chapman|first=Same|date=May 3, 2012|work=The Whitman College Pioneer: Whitman College}}</ref>{{Better source|date=July 2018}} Or a firm emitting [[pollution]] will typically not take into account the costs that its pollution imposes on others. As a result, pollution may occur in excess of the 'socially efficient' level, which is the level that would exist if the market was required to account for the pollution. A classic definition influenced by [[Kenneth Arrow]] and [[James Meade]] is provided by Heller and Starrett (1976), who define an externality as "a situation in which the private economy lacks sufficient incentives to create a potential market in some good and the nonexistence of this market results in losses of [[Pareto efficiency]]".<ref>Heller, Walter P. and David A. Starrett (1976), On the Nature of Externalities, in: Lin, Stephen A.Y. (ed.), Theory and Measurement of Economic Externalities, Academic Press, New York, p.10</ref> In economic terminology, externalities are examples of [[market failure]]s, in which the unfettered market does not lead to an efficient outcome.