Why Do Decision Makers Tend to Ignore External Costs? How

question 44

Essay

Why do decision makers tend to ignore external costs? How can internalizing external costs move us closer to efficient levels of output?

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Definitions:

Intelligence

The ability to learn, understand, and apply knowledge, including problem solving and adapting to new situations.

Belief Congruence Theory

The theory that similar beliefs promote liking and social harmony among people while dissimilar beliefs produce dislike and prejudice.

Displacement

Psychodynamic concept referring to the transfer of negative feelings on to an individual or group other than that which originally caused the negative feelings.

Tit-for-Tat Procedure

A strategy in game theory where a participant replicates an opponent's previous action, typically used to foster cooperation.