Externalities (costs excluded from transaction costs)
Externalities are costs not captured by the market – e.g., pollution from burning fossil fuels, that results in contaminated fish and air that result in illnesses and lost revenues (e.g., from fishing). These costs are not reflected in market prices at say the gas pump, the smoke stack, or the electricity meter, but rather arise in another system such as healthcare. Negative externalities are considered by economists as market failures that distort the market and the economic landscape.
