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The idea of externality was first evolved by business analyst Arthur Pigou in the 1920s.[2] The prototypical illustration of a negative externality is natural contamination.

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The idea of externality was first evolved by business analyst Arthur Pigou in the 1920s.[2] The prototypical illustration of a negative externality is natural contamination. Pigou contended that an assessment, equivalent to the negligible harm or peripheral outside cost, (later called a "Pigouvian charge") on bad externalities could be utilized to decrease their rate to an effective level.[2] Subsequent scholars have discussed whether it is desirable over charge or to control negative externalities,[3] the ideally productive level of the Pigouvian taxation,[4] and what variables cause or worsen negative externalities, for example, furnishing financial backers in companies with restricted obligation for hurts submitted by the corporation. [5][6][7]

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