Business, Legal & Accounting Glossary
True Cost Economics is a new system of thought developing as a reaction to Neoclassical Economics. Neoclassical Economics stipulates that prices are and should be determined by the market principle of supply and demand. True Cost Economics, on the other hand, adds that the price of a good should not be solely determined by supply and demand, but should also account for the societal, health and environmental costs that result from the production and use of the good.
The price of goods that directly or indirectly affect humans’ quality of life or the quality of the environment in which humans live would increase substantially under True Cost Economics. For example, recent estimates predict that True Cost Economics would cause the average price of a car to increase by $40,000 because of the various forms of pollution associated with automobiles. Furthermore, the price of an airline ticket would likely increase by several hundred dollars.
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This glossary post was last updated: 20th February, 2020