Positive Externality
Plain definition
A positive externality is a benefit of an economic activity enjoyed by third parties who did not pay for it.
In economics
With positive externalities, the market produces less than the socially optimal amount because producers ignore external benefits. Subsidies, public provision, or tax credits can push output toward the social optimum.
Example
Vaccination protects not only the vaccinated person but also others by reducing disease spread, so public health programs often subsidize vaccines.
Common confusion
A positive externality does not mean the activity has no costs; it means third parties receive some benefit for free, while the activity itself may still impose costs on others.