The True Cost of Smoking
In economics, an “externality” refers to the cost (negative externality) or benefit (positive externality) incurred or received by a third party, who has no control over the creation of that cost or benefit.
The “go to” example used to explain negative externalities is pollution. A company that pollutes receives the economic benefits of their polluting activity, while the rest of society bears the cost of the environmental damage caused by the polluter.
If an industrial factory discharges their chemical waste into a nearby river, the residents near the river will be made worse off as a result. The people who live near the river had no control over the factories decision to pollute the river, but they bear 100% of the cost of that action.
That’s a negative externality. Specifically, that is a negative “production externality” as it is caused by economic production. However, there are also consumption externalities caused by consumption of products that have a cost to society.
The most obvious example is smoking (consuming) cigarettes. Choosing to regularly smoke cigarettes greatly increases an individual's chance of developing chronic medical issues. Which puts a serious financial strain on public budgets which are paid for by taxpayers AKA, the rest of society.
