Temporal Externalities

Temporal externalities occur when the effects of an activity impact different time periods, either immediately or in the future. For example, a factory might lower costs now by emitting pollution, but future generations suffer from environmental damage. These externalities are often overlooked because the costs or benefits are not directly borne by those making decisions at the moment. Recognizing temporal externalities helps in designing policies that account for long-term impacts, ensuring that actions taken today do not negatively affect future well-being.