Arthur Pigou was a British economist known for his work in welfare economics and public finance. Born in 1877, he contributed significantly to the understanding of externalities, which are costs or benefits incurred by third parties not directly involved in an economic transaction. His most notable work, "The Economics of Welfare," published in 1920, laid the foundation for analyzing how government intervention can improve social welfare. Pigou introduced the concept of Pigovian taxes, which are taxes levied on activities that generate negative externalities, such as pollution. By taxing these activities, governments can encourage individuals and businesses to reduce harmful behaviors, ultimately leading to a more efficient allocation of resources. His ideas have influenced modern economic policies and environmental regulations.