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Hunt Allcott & Cass R. Sunstein, Regulating Internalities, 34 J. Pol’y Analysis & Mgmt. 698 (2015).

Abstract: This paper offers a framework for regulating internalities. Using a simple economic model, we provide four principles for designing and evaluating behaviorally-motivated policy. We then outline rules for determining which contexts reliably reflect true preferences and discuss empirical strategies for measuring internalities. As a case study, we focus on energy efficiency policy, including Corporate Average Fuel Economy (CAFE) standards and appliance and lighting energy efficiency standards.