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Environmental Policy Theory Given Bounded Rationality and Other-regarding Preferences

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Abstract

Established environmental policy theory is based on the assumption of homo economicus. This means that people are seen as fully rational and acting in a self-regarding manner. In line with this, economics emphasizes efficient policy solutions and the associated advantages of price incentives. Behavioral economics offers alternative, more realistic views on individual behavior. In this paper we investigate opportunities to integrate bounded rationality and other-regarding preferences into environmental policy theory to arrive at recommendations for more effective policies. For this purpose, we will address decisions made under risk and uncertainty, intertemporal choice, decision heuristics, other-regarding preferences, heterogeneity, evolutionary selection of behaviors, and the role of happiness. Three aspects of environmental policy are considered in detail, namely sustainable consumption, environmental valuation and policy design. We pay special attention to the role of non-pecuniary, informative instruments and illustrate the implications for climate policy.

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Authors and Affiliations

  1. Institute for Environmental Science and Technology, Universitat Autònoma de Barcelona, Edifici Cn—Campus UAB, 08193, Bellaterra, Cerdanyola, Spain

    Elisabeth Gsottbauer

  2. ICREA, Barcelona, Spain

    Jeroen C. J. M. van den Bergh

  3. Department of Economics and Economic History & Institute for Environmental Science and Technology, Universitat Autònoma de Barcelona, Edifici Cn—Campus UAB, 08193, Bellaterra, Cerdanyola, Spain

    Jeroen C. J. M. van den Bergh

  4. Faculty of Economics and Business Administration and Institute for Environmental Studies, VU University Amsterdam, Amsterdam, The Netherlands

    Jeroen C. J. M. van den Bergh

  5. NAKE and Tinbergen Institute, Amsterdam, The Netherlands

    Jeroen C. J. M. van den Bergh

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  1. Elisabeth Gsottbauer
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Gsottbauer, E., van den Bergh, J.C.J.M. Environmental Policy Theory Given Bounded Rationality and Other-regarding Preferences. Environ Resource Econ 49, 263–304 (2011). https://doi.org/10.1007/s10640-010-9433-y

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