Definition of ‘Externality’
A consequence of an economic activity that is experienced by unrelated third parties. An externality can be either positive or negative.
Pollution emitted by a factory that spoils the surrounding environment and affects the health of nearby residents is an example of a negative externality. An example of a positive externality is the effect of a well-educated labor force on the productivity of a company.
As the old adage goes ” In every crisis, there’s always an opportunity for someone.” This may also be true in the notorious case of extensive oil spill in the Gulf of Mexico.
An oil spill is a threat to wildlife due to water pollution and to people’s livelihood dependent on the products of the sea. On the other hand, some sectors also benefited from the oil spill in terms of employment opportunities and work generated to clean up the oil spill. While the harmful effects to wildlife are negative externalities this is counterbalanced by the positive benefits derived by people in terms of additional income from work generated,
i. e., by the clean up activity which is considered a positive externality in economic terms.
This short Al Jazeerah report looks at the aftermath of the Deepwater Horizon disaster and the impact it continues to have on the regional fishing industry. Two years since oil company BP’s Deepwater Horizon rig exploded in the Gulf of Mexico, resulting in a massive oil spill, fishermen in the region are still suffering. The explosion killed 11 people and resulted in the worst accidental offshore oil spill in US history.