True Cost Economics


DEFINITION of 'True Cost Economics'

An economic model that seeks to include the cost of negative externalities into the pricing of goods and services. Supporters of this type of economic system feel products and activities that directly or indirectly cause harmful consequences to living beings and/or the environment should be accordingly taxed to reflect the somewhat hidden costs.

BREAKING DOWN 'True Cost Economics'

This school of thought is on the rise as a result of the perceived need for ethical consideration in neoclassical economic theory. However, the cost of many goods and services that are currently affordable, and often taken for granted, could see an extreme rise in costs if their "true costs" are accounted for.

For example, if one accounted for air, noise and other types of pollution caused by the manufacturing and the use of a new car, then the price of the new car would, by estimates, raise by over $40,000.

  1. Externality

    A consequence of an economic activity that is experienced by ...
  2. Social Responsibility

    The idea that companies should embrace its social responsibilities ...
  3. Classical Economics

  4. Microeconomics

  5. Neoclassical Economics

  6. Macroeconomics

Related Articles
  1. Economics

    Economics Basics

  2. Economics

    Does High GDP Mean Economic Prosperity?

  3. Investing Basics

    Sinful Investing: Is It For You?

  4. Stock Analysis

    5 Reasons Thoratec Corp. Keeps Impressing Investors

  5. Entrepreneurship

    Startup Analysis: How Much Is Palantir Worth?

  6. Stock Analysis

    Jawbone: An IPO You Should Have on Your Radar

  7. Economics

    What is a Free Rider Problem?

  8. Stock Analysis

    Startup Analysis: How Much Is Dropbox Worth?

    Learn about the private company Dropbox and how it operates. Understand the company's current valuation, how it was derived, and if it deserves it.
  9. Stock Analysis

    Startup Analysis: How Much Is Lyft Worth?

    Learn about the private company Lyft and how it has become a successful rideshare company. Understand its most recent valuation and if it is deserved.
  10. Stock Analysis

    Startup Analysis: How Much Is Spotify Worth?

    Learn about the private company Spotify and how it has achieved success. Understand the company's most recent valuation and if it is warranted.
  1. What is the broken window fallacy?

    The broken window fallacy was first expressed by the great French economist, Frederic Bastiat. Bastiat used the parable of ... Read Full Answer >>

  3. What does marginal utility tell us about consumer choice?



  6. What is a negative write-off?


You May Also Like

Hot Definitions
  1. Alligator Spread

  2. Tiger Cub Economies

  3. Gorilla

  4. Elephants

  5. Widow's Exemption

  6. Wedding Warrant

Trading Center

You are using adblocking software

so you'll never miss a feature!