Externalities

Internalization of externalities is an essential ingredient in making the change to a “sustainability” mindset. What does that mean? Previously I talked about “individual utility” vs. “community utility”. Maybe a better way to express it is the distinction between “internal utility” vs. “external utility”. We “internalize externalities” by providing more and better information about the externalities. This is typically done via guilt, which immediately develops resistance. It is better to bring in externalities by showing how the externality can increase internal utility.


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