Externalizing costs

Externalizing costs refers to situations where the negative impacts of an activity are not paid for by the person or organization responsible but are instead borne by society or the environment. For example, a factory may pollute a river, causing harm to local residents and ecosystems, without bearing the full cleanup or health costs. This shifts the burden onto others who must manage or suffer from these consequences, leading to inefficiencies and unfair outcomes. Addressing externalizing costs often involves regulations or policies to ensure that those responsible pay or mitigate these negative effects.