Internality

In behavioral economics, an internality is a type of behavior that imposes costs on a person in the long-run, that are not taken into account when first making decisions. Classical Economics discourages government from creating legislation that targets internalities, because it is assumed that the consumer takes these personal costs into account when paying for the good that causes the internality.[1]

References

  1. ↑ Herrnstein, R., Loewenstein, G., Prelec, D. & Vaughan, W. (1993). Utility maximization and melioration: Internalitites in individual choice. Journal of Behavioral Decision Making, 6, 149-185.


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