What leads to negative externalities?
Negative externalities are negative effects that are felt by those who have not taken part in the transactions that caused the effects. They can be caused by many things. Most commonly, a company will make a decision and will negatively effect the citizens nearby.
Say, for instance, that a mining company decides to drill in a town. This leads to negative externalities because the town people, who had no part in the company's decision to drill there, will feel negative effects, like pollution.