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Behavioral Economics and Environmental Policy

Author

Listed:
  • Fredrik Carlsson
  • Olof Johansson-Stenman

    (Department of Economics, University of Gothenburg, SE 405 30 Gothenburg, Sweden)

Abstract

This article provides an interpretive survey on implications of insights from behavioral economics for environmental policy. In particular, it discusses whether, and if so how, policy implications based on conventional economic theory have to be modified when insights from behavioral economics are considered. More specifically, it discusses concerns for cooperation, fairness, self-image, social approval, and status. Moreover, it addresses potential crowding-out effects, context-dependent and incoherent preferences, risk misperceptions, ambiguity aversion, and regulator bias. We conclude that behavioral economics has a lot to offer environmental economics and that some normative policy recommendations have to be modified. Yet the most fundamental policy recommendations in environmental economics generally prevail and are sometimes even reinforced through behavioral economics insights.

Suggested Citation

  • Fredrik Carlsson & Olof Johansson-Stenman, 2012. "Behavioral Economics and Environmental Policy," Annual Review of Resource Economics, Annual Reviews, vol. 4(1), pages 75-99, August.
    • Handle: RePEc:anr:reseco:v:4:y:2012:p:75-99
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    File URL: http://www.annualreviews.org/doi/abs/10.1146/annurev-resource-110811-114547
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    More about this item

    Keywords

    voluntary cooperation; fairness; self-image; social approval; status; crowding-out effects; context dependency; incoherent preferences; risk misperception; ambiguity aversion; regulator bias;
    All these keywords.

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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