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Costs or benefits affecting parties not directly involved in a transaction—pollution is a negative externality, education a positive one. IRSA's Regenerative Economic Architecture shows how to internalise externalities architecturally: designing systems where external effects flow back into the system as feedback, creating self-correcting dynamics.
Factory pollution harms nearby residents. Traditional solution: tax or regulate. REA approach: design industrial architecture where pollution costs automatically flow back to producers, making clean production the path of least resistance.
See: Regenerative Economic Architecture, Feedback Closure