internality

Internality is a term used in economics and behavioral science to describe costs or benefits of an individual's actions that are borne by the person’s future self, rather than by others. It arises when present decisions fail to fully account for future consequences, often due to time-inconsistent preferences, hyperbolic discounting, or self-control problems. This concept is contrasted with externalities, which affect people other than the decision-maker.

Examples of internalities include impulsive spending that reduces retirement savings, unhealthy behaviors such as smoking or overeating that impose future health costs on the individual, and procrastination that lowers future productivity or well-being. Because internalities are experienced by the same person over time, they are typically discussed in the context of self-control, future planning, and intertemporal choice rather than social spillovers.

Policy relevance centers on how to help individuals align their present choices with their long-term preferences. Approaches include commitment devices, automatic enrollment or default options in savings plans, and other gentle nudges that preserve choice but improve long-run outcomes. The idea is to “internalize” the benefits and costs that the future self would value if it could influence present decisions.

Debates around internalities cover measurement and normative judgment. Quantifying internalities is challenging because it requires modeling how individuals value future selves, which may differ across time and context. Some scholars view internalities as legitimate targets for policy reform, while others caution that not all deviations from long-run preferences reflect failed judgment—some reflect genuine shifts in preferences over time.