The Economics of
How Policies and Initiatives
Influence Human Behavior
The Costs of Living in a City
“The City,” Ed Sheeran
What negative effects can result
from rapid urbanization?
An externality is an unintended
consequence of actions that people or
groups of people take, which can affect third
parties (or those who are not a part of the
action that was taken)
Externalities can be caused by consumers or
Ex: Honking, traffic, pollution, trash
+ What negative externalities
occurring in London does Ed
Sheeran sing about?
Look at your lyrics
How can you influence human behavior
to minimize externalities?
An incentive is anything that motivates an individual
to make a particular decision or complete a specific
Ex: Bonuses, solar roofs, merit-based scholarships
+ How could the government
incentivize city dwellers to make
more responsible choices?
Case Study: How Sweden
Fixed Traffic Problems
How to Solve Traffic Jams