External diseconomy
When the economic activity of a consumer or producer has some negative influence on other consumers or producers, the activity is described as external diseconomy. External diseconomy is classified into monetary external diseconomy and technical external diseconomy. The market will fail as long as the external diseconomy exists, and therefore it should be made internal. Car emissions are a typical example of excessive technical external diseconomy. To make this activity internal, an amount of money comparable to the external diseconomy should be levied on drivers to make them bear the social costs. The Pigovia-style carbon tax is one means of internalizing the external diseconomy of carbon dioxide emission.
Social costs
When conducting an economic activity, the costs the user bears are called private costs. However, if the activity is accompanied with technical externality, the broader costs of the activity are called the social costs, including the costs corresponding to externalities as well as the private costs. In the area of transportation, the main problem is the social costs of automobiles. In addition to the monetary cost for fuel, etc., which drivers bear, the social costs of automobile usage include external costs, such as those associated with congestion, environment and traffic accidents. However, there is no clear definition of cost items. Some surveys consider that additional investments for not infringing on the basic rights of citizens should be included in the social costs.
