Positive externalities exist when the marginal social benefit of production and or consumption exceeds the marginal private benefit i.e. production and/or consumption generate external benefits that may go under-valued by the market.

There are plenty of examples of economic activities that can generate positive externalities:

• Industrial training by firms: This can reduce the costs faced by other firms and has important effects on labour productivity. A faster growth of productivity allows more output to be produced from a given amount of resources and helps improve living standards throughout the economy, thereby shifting the production possibility frontier outwards.
• Research into new technologies which can then be disseminated for use by other producers. These technology spill-over effects help to reduce the costs of other producers and cost savings might be passed onto consumers through lower prices
• Education: A well educated labour force can increase efficiency and produce other important social benefits. Increasingly policy-makers are coming to realise the increased returns that might be exploited from investment in human capital at all ages.
• Health provision: Improved health provision and health care reduces absenteeism and creates a better quality of life and higher living standards.
• Employment creation by new small firms
• Flood protection system and spending on improved fire protection in schools and public arenas
• Arts and sporting participation and enjoyment derived from historic buildings