Behavioral Economics of Environmental Policy Design
Funding: Alexander von Humboldt-Foundation in the framework of the Alexander von Humboldt-Professorship endowed by the German Federal Ministry of Education and Research; and Ministry of Science and Culture of Lower Saxony (Germany).
Motivation: Human impacts on the world’s ecosystems are undermining the very basis of our societal well-being (Millennium Ecosystem Assessment 2005). Institutions are needed that foster more sustainable human behavior (Mayntz 2006). Two modern policy approaches complementing or substituting for conventional command-and- control approaches have emerged (Mayntz 2006, Perman et al. 2003, Ostrom 1990): (i) economic incentives, and (ii) cooperative approaches based on self-regulation). They have developed independently and are based on apparently contradicting assumptions about what drives human behavior, namely (i) self-interest, requiring material motivations, or (ii) social and environmental preferences providing intrinsic motivations for sustainable action and beliefs supporting such action. However, individuals are more likely to have a mix of these motivations and to weigh them differently in contexts with strong or weak social norms. It is thus increasingly clear that neither approach alone will effectively address contemporary environmental challenges such as climate mitigation and adaptation, biodiversity conservation and water resources management. Combined approaches are needed and have started to emerge in practice (Vatn 2009, Vollan 2008). Scientific literature on how to best design such policies is scarce (Parkhurst 2000, Parkhurst and Shogren 2007) and largely ignores an important complexity of human behavior: the social and environmental preferences and beliefs that are crucial for self-regulation may be altered by introducing economic incentives. This complexity turns combining the two policy approaches into a highly tricky task. Careful policy design requires understanding the interplay between economic incentives, social and environmental preferences and relevant beliefs, to assure that combining approaches is not counterproductive.
General objective: The general objective of this collection of research projects is to analyze how to design effective and efficient policies combining economic incentives and self-regulation, considering that the preferences and beliefs driving human behavior may be policy-dependent. For this purpose, we analyse the performance of specific policies considering insights from behavioural economics, psychology and other related disciplines.