Generating Positive Externalities


People or companies may confer benefits on third parties without cost, as a side effect or byproduct of their actions. Planting a tree improves the neighborhood and provides shade to a neighbor. Keeping bees results in the pollination of nearby crops. Providing first-aid training to workers may save lives outside of work. A video or blog post created for clients might contain an idea that helps people who are not clients.

These are examples of what economists call positive externalities. These things are all good: they make the world a better place.

I believe the concept applies in our interactions with others, as well. Have you ever had your day brightened by the smile of a stranger? Opened a door for someone with an armload of packages? Been thanked for doing an otherwise thankless task? Let someone with whom you do business know how much you appreciate what they do?

All of these things are benefits without costs attached. They are positive externalities, on the small scale of daily life. They are also free to the giver.

But just as planting a tree improves our home as well as the neighborhood, generating positive externalities in daily life also helps us. Friends and family members respond to the empathy, kindness and thoughtfulness embedded in them. If employed, our colleagues and superiors are likely to value the intangibles we add to the workplace environment. In business, our clients and teammates enjoy our interactions more.

Generating positive externalities is not charity. There are no costs involved, only benefits to both giver and recipient. Win-win.

The general concept has been around for a long time, and is often expressed more simply: be kind. Fill up the buckets of others. Do unto others.

Clients, if you would like to talk about this or anything else, please email us or call.