Externalities. A related term common to the public choice literature is externality, or spillover effect. When a public policy in one sphere of social action affects other spheres of social action, the manner in which the other spheres are affected is called an externality; that is, the effects of a public policy in one sphere spill over into other spheres. Externalities may be positive or negative, intended or unintended. For example, a positive, intended spillover effect of reducing corporate taxes might be to raise employment levels. A negative, unintended externality of the same public policy might be to reduce the financial resources available to the government for welfare programs.