A situation in which an individual or a firm takes advantage of special
knowledge while engaging in socially inefficient behaviour.
adverse selection
Self-selection, within a single risk category, of persons of above-average
risk.
paternalism
Intervention in the free choices of individuals by others (including
governments) to protect them against what is presumed to be their own
ignorance or folly.
cost-benefit analysis
An approach for evaluating the desirability of a given policy, based on
comparing total (opportunity) costs with total benefits.
rent seeking
Behaviour whereby private firms and individuals try to use the powers of
the government to enhance their own economic well-being in ways that
are not in the social interest.
internalizing the externality
A process that results in a producer or consumer taking account of a
previously external effect.
tradable pollution permits
Rights to emit specific amounts of specified pollutants that private firms