In case you slept through or missed Economics 101, an externality occurs when a common resource (e.g. air, water, parks) that is of use to many, but does not have a direct user feedback mechanism (e.g. user fee, penalty, even reward) when the resource gets abused, or improved. It can be a positive externality (vaccinations keep diseases for spreading in a society, keeping your house in good condition helps neighbors’ property values) or a negative externality such as pollution – perhaps the most common example. The shared resources that get used and abused are also called commons – an originally English concept referring to those parts of a lord’s property that tenants, aka ‘commoners’, had access to.
In the corporate procurement world, supplier data (as well as product, customer and other broadly used data sources) is one of those common resources that can benefit all, but can easily be polluted or destroyed by a few individuals, typically without any consequences. Conversely, those working to keep their data clean often go unrewarded. In other words, it’s a tragedy of the commons – or a ‘negative externality’ in modern Econ-speak.