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Regulating Internalities

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  • Hunt Allcott
  • Cass R. Sunstein

Abstract

This paper offers a framework for regulating internalities. Using a simple economic model, we provide four principles for designing and evaluating behaviorally-motivated policy. We then outline rules for determining which contexts reliably reflect true preferences and discuss empirical strategies for measuring internalities. As a case study, we focus on energy efficiency policy, including Corporate Average Fuel Economy (CAFE) standards and appliance and lighting energy efficiency standards.
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Suggested Citation

  • Hunt Allcott & Cass R. Sunstein, 2015. "Regulating Internalities," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 34(3), pages 698-705, June.
    • Handle: RePEc:wly:jpamgt:v:34:y:2015:i:3:p:698-705
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    File URL: http://hdl.handle.net/10.1002/pam.21843
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    References listed on IDEAS

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    Cited by:

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    2. Leard, Benjamin & Linn, Joshua & Springel, Katalin, 2019. "Pass-Through and Welfare Effects of Regulations that Affect Product Attributes," RFF Working Paper Series 19-07, Resources for the Future.
    3. Inge van den Bijgaart & David Klenert & Linus Mattauch & Simona Sulikova, 2024. "Healthy climate, healthy bodies: Optimal fuel taxation and physical activity," Economica, London School of Economics and Political Science, vol. 91(361), pages 93-122, January.
    4. A. G. Winegar & C. R. Sunstein, 2019. "How Much Is Data Privacy Worth? A Preliminary Investigation," Journal of Consumer Policy, Springer, vol. 42(3), pages 425-440, September.
    5. Brent, Daniel A. & Ward, Michael B., 2018. "Energy efficiency and financial literacy," Journal of Environmental Economics and Management, Elsevier, vol. 90(C), pages 181-216.
    6. Taylor, Michael H. & Rollins, Kimberly & Lott, Corey, 2018. "Exploring the behavioral and welfare implications of social-comparison messages in residential water and electricity," Economics Letters, Elsevier, vol. 168(C), pages 65-69.
    7. Mattauch, Linus & van den Bijgaart, Inge & Klenert, David & Sulikova, Simona, 2020. "Optimal fuel taxation with suboptimal health choices," INET Oxford Working Papers 2020-22, Institute for New Economic Thinking at the Oxford Martin School, University of Oxford.
    8. Brent, Daniel A. & Ward, Michael B., 2019. "Price perceptions in water demand," Journal of Environmental Economics and Management, Elsevier, vol. 98(C).
    9. Chan, Nathan W. & Globus-Harris, Isla, 2023. "On consumer incentives for energy-efficient durables," Journal of Environmental Economics and Management, Elsevier, vol. 119(C).
    10. Céline Nauges & Dale Whittington, 2019. "Social Norms Information Treatments in the Municipal Water Supply Sector: Some New Insights on Benefits and Costs," Water Economics and Policy (WEP), World Scientific Publishing Co. Pte. Ltd., vol. 5(03), pages 1-40, July.
    11. Leonhard K. Lades & Ewa Zawojska & Robert J. Johnston & Nick Hanley & Liam Delaney & Mikołaj Czajkowski, 2022. "Anomalies or Expected Behaviors? Understanding Stated Preferences and Welfare Implications in Light of Contemporary Behavioral Theory," Working Papers 2022-20, Faculty of Economic Sciences, University of Warsaw.
    12. Jesse Burkhardt & Nathan W. Chan & Bryan Bollinger & Kenneth T. Gillingham, 2022. "Conformity and Conservation: Evidence from Home Landscaping and Water Conservation," American Journal of Agricultural Economics, John Wiley & Sons, vol. 104(1), pages 228-248, January.
    13. Daniel C. Matisoff & Douglas S. Noonan & Mallory E. Flowers, 2016. "Policy Monitor—Green Buildings: Economics and Policies," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 10(2), pages 329-346.
    14. Tobias Wekhof & Sébastien Houde, 2023. "Using narratives to infer preferences in understanding the energy efficiency gap," Nature Energy, Nature, vol. 8(9), pages 965-977, September.
    15. Luca Panzone & Guy Garrod & Felice Adinolfi & Jorgelina Di Pasquale, 2022. "Molecular marketing, personalised information and willingness‐to‐pay for functional foods: Vitamin D enriched eggs," Journal of Agricultural Economics, Wiley Blackwell, vol. 73(3), pages 666-689, September.
    16. Odermatt, Reto & Stutzer, Alois, 2017. "Subjective Well-Being and Public Policy," IZA Discussion Papers 11102, Institute of Labor Economics (IZA).
    17. Leonhard Lades & Federica Nova, 2022. "Ethical Considerations when using Behavioural Insights to Reduce Peoples Meat Consumption," Working Papers 202209, Geary Institute, University College Dublin.

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    More about this item

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D04 - Microeconomics - - General - - - Microeconomic Policy: Formulation; Implementation; Evaluation
    • D10 - Microeconomics - - Household Behavior - - - General
    • D18 - Microeconomics - - Household Behavior - - - Consumer Protection
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • K0 - Law and Economics - - General
    • K20 - Law and Economics - - Regulation and Business Law - - - General
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L - Industrial Organization

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