externality

An externality is a change of state in a (>elementary)process which is not directly related to that process but to another process as a cause. In economics, externalities are non-intended by the >actor that receives their impact as a result of another actor's action. Externalities in networks rarely can be analyzed in isolation but interact with >configurations, so that for every network one can identify a related network of externalities.

One of the most general cases is that of the >hypercycle where in a circular concatenation of chemical reactions catalysts are produced as by-products by the single reactions that support the other reactions, finally making up a cyclic structure of externalities. In economics, the concept is always referred to the concept of intentional >action and market-related reciprocity. Here, a distinction is made between the processes internal to the >market and the by-products which are not the object of market relations. If the by-products alter the state of an actor in a way that (s)he does not want, this is a negative externality, if so, positive. Positive externalities generate hypercyclic structures in the economy, if the by-products support the market-relations. For example, in industrial districts there is a flow of knowledge among the residing firms that is not internalized in their market relations (i.e. there is no accompanying payment). Since this flow is itself a circular process, it contributes to the ove
rall increase of productivity of the firms.

Externalities are a crucial term in ecological analysis, because there is the problem that institutional evolution might not necessarily be directed at a complete internalization of externalities, because this would be only possible at a high level of >transaction costs. Furthermore, intentional action on externalities presupposes referential knowledge, which may only result from long-run evolution, so that in the present there is fundamental uncertainty regarding their size and scope. This poses fundamental limits to the use of the price mechanism to solve problems of environmental policy.

Semantic Field
production
action   externality