Define the term 'social cost'.

In economics, the costs of production or consumption can be split. Private costs are those directly incurred by the individuals involved in the activity (e.g., a factory's cost for materials and labour). External costs (or negative externalities) are the costs imposed on third parties who are not directly involved (e.g., pollution from the factory affecting local residents). The social cost is the sum of these two, representing the true cost to society as a whole.