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Behavioral Economics and Climate Change Policy

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  • John M. Gowdy

    ()
    (Department of Economics, Rensselaer Polytechnic Institute, Troy NY 12180-3590, USA)

Abstract

The policy recommendations of most economists are based on the rational actor model of human behavior. Behavior is assumed to be self-regarding, preferences are assumed to be stable, and decisions are assumed to be unaffected by social context or frame of reference. The related fields of behavioral economics, game theory, and neuroscience have confirmed that human behavior is other regarding, and that people exhibit systematic patterns of decision-making that are "irrational" according to the standard behavioral model. This paper takes the position that it is these "irrational" patterns of behavior that uniquely define human decision making and that effective economic policies must take these behaviors as the starting point. This argument is supported by game theory experiments involving humans, closely related primates, and other animals with more limited cognitive ability. The policy focus of the paper is global climate change. The research surveyed in this paper suggests that the standard economic approach to climate change policy, with its almost exclusive emphasis on rational responses to monetary incentives, is seriously flawed. In fact, monetary incentives may actually be counter-productive. Humans are unique among animal species in their ability to cooperate across cultures, geographical space and generations. Tapping into this uniquely human attribute, and understanding how cooperation is enforced, holds the key to limiting the potentially calamitous effects of global climate change.

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Paper provided by Rensselaer Polytechnic Institute, Department of Economics in its series Rensselaer Working Papers in Economics with number 0701.

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Date of creation: Jan 2007
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Handle: RePEc:rpi:rpiwpe:0701

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Cited by:
  1. Welsch, Heinz, 2009. "Implications of happiness research for environmental economics," Ecological Economics, Elsevier, vol. 68(11), pages 2735-2742, September.
  2. Timothy Waring & Mario Teisl & Eva Manandhar & Mark Anderson, 2014. "On the Travel Emissions of Sustainability Science Research," Sustainability, MDPI, Open Access Journal, vol. 6(5), pages 2718-2735, May.
  3. Alessandro Tavoni & Maja Schlüter & Simon Levin, 2011. "The survival of the conformist: social pressure and renewable resource management," Grantham Research Institute on Climate Change and the Environment Working Papers 35, Grantham Research Institute on Climate Change and the Environment.
  4. Rosetta Lombardo, 2011. "The Role Of Corporate Social Responsibility In Consumer Behaviour: An Unresolved Paradox," Working Papers 201115, Università della Calabria, Dipartimento di Economia, Statistica e Finanza (Ex Dipartimento di Economia e Statistica).
  5. Baddeley, M., 2011. "Energy, the Environment and Behaviour Change: A survey of insights from behavioural economics," Cambridge Working Papers in Economics 1162, Faculty of Economics, University of Cambridge.
  6. Mzoughi, Naoufel, 2011. "Farmers adoption of integrated crop protection and organic farming: Do moral and social concerns matter?," Ecological Economics, Elsevier, vol. 70(8), pages 1536-1545, June.
  7. Elisabeth Gsottbauer & Jeroen den Bergh, 2013. "Bounded rationality and social interaction in negotiating a climate agreement," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 13(3), pages 225-249, September.
  8. John M. Gowdy, . "Valuing Nature For Climate Change Policy: From Discounting The Future To Truly Social Deliberation," Rensselaer Working Papers in Economics 1201, Rensselaer Polytechnic Institute, Department of Economics.
  9. S. Scrieciu & Zaid Chalabi, 2014. "Climate policy planning and development impact assessment," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 19(3), pages 255-260, March.
  10. Lohse, Johannes & Goeschl, Timo & Diederich , Johannes, 2014. "Giving is a question of time: Response times and contributions to a real world public good," Working Papers 0566, University of Heidelberg, Department of Economics.
  11. Nathalie Lazaric & Kevin Maréchal, 2010. "Overcoming inertia: insights from evolutionary economics into improved energy and climate policy," Post-Print hal-00452205, HAL.
  12. Alessandro Tavoni, 2009. "Incorporating Fairness Motives into the Impulse Balance Equilibrium and Quantal Response Equilibrium Concepts: An Application to 2x2 Games," Working Papers 2009.40, Fondazione Eni Enrico Mattei.
  13. John Gowdy & Aneel Salman, 2007. "Climate Change and Economic Development: A Pragmatic Approach (Invited Lecture)," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 46(4), pages 337-350.
  14. Hirazawa, Makoto & Saito, Koichi & Yakita, Akira, 2011. "Effects of international sharing of pollution abatement burdens on income inequality among countries," Journal of Economic Dynamics and Control, Elsevier, vol. 35(10), pages 1615-1625, October.
  15. Beretti, Antoine & Figuières, Charles & Grolleau, Gilles, 2013. "Behavioral innovations: The missing capital in sustainable development?," Ecological Economics, Elsevier, vol. 89(C), pages 187-195.
  16. Olivier Brette & Thomas Buhler & Nathalie Lazaric & Kevin Marechal, 2014. "Reconsidering the Nature and Effects of Habits in Urban Transportation Behaviour," GREDEG Working Papers 2014-10, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), University of Nice Sophia Antipolis.
  17. Elisabeth Gsottbauer & Jeroen Bergh, 2011. "Environmental Policy Theory Given Bounded Rationality and Other-regarding Preferences," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 49(2), pages 263-304, June.
  18. Jorge Araña & Carmelo León, 2013. "Can Defaults Save the Climate? Evidence from a Field Experiment on Carbon Offsetting Programs," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 54(4), pages 613-626, April.
  19. Rachel Croson & Nicolas Treich, 2014. "Behavioral Environmental Economics: Promises and Challenges," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 58(3), pages 335-351, July.
  20. Anderson, Blake & M'Gonigle, Michael, 2012. "Does ecological economics have a future?," Ecological Economics, Elsevier, vol. 84(C), pages 37-48.
  21. Markus Pasche, 2013. "What Can be Learned from Behavioural Economics for Environmental Policy?," Jena Economic Research Papers 2013-020, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
  22. John M. Gowdy, 2010. "Behavioral economics, neuroeconomics, and climate change policy: baseline review for the garrison institute initiative on climate change," Rensselaer Working Papers in Economics 1010, Rensselaer Polytechnic Institute, Department of Economics.

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