Behavioral Aspect in Handling Environmental Issues

This post is largely influenced by John Gowdy’s paper on this topic. Classical economics has modeled self-interest and greed. We do not dare question Adam’s Smith’s invisible hand. Any deviancy from this behavior was considered irrational. But, the last couple of decades have been an eye opener and it has been brought about the bridging disciplines of game theory, neuroscience and traditional economics.

My assumption (and that of many others) is that people are hard wired for compassion and some goodness.

When looking at a macro scale, to solve common good issues like environment and climate change, we need to be able to appeal to, what I naively call this goodness facto(X) in humans. Classical economists would run to a better incentive design involving monetary rewards and punishments to go about achieving this. There are probably two reasons why this would not work. First, studies show that money has a negative priming effect. The very thought of money makes people less helpful and selfish. In fact, money acts detrimental in making people do good deeds.

Unfortunately behavioral economics is still at an experimental stage. Its effects have to reflect in the technology and policy making. It was heartening to see the Green button App contest that is on currently. It is to incentivize people to behave in a conservative manner. The solution to environmental problems may be technological, but it needs to be complemented by good behavioral studies to address this problem at the deepest level.

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3 Comments

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3 responses to “Behavioral Aspect in Handling Environmental Issues

  1. elwaite

    I really appreciate your blog post! The role of altruism and behavioral studies in economics is very interesting, especially related to environmental affairs. And I couldn’t agree more that true solutions to environmental problems must blend technology and behavioral change- otherwise, we aren’t really learning/solving anything!

    It’s interesting to ponder how modern society has progressed to embrace current economic philosophy and adopted environmentally destructive behavior. Although some may disagree, it would seem society has lost sight of its altruistic core. Reconnecting with our roots and instincts and reconsidering current systems could go a long way in solving the problems of today. I am certain it would be more successful and efficient in the long run than relying solely on technology and money!

    • nprana

      Thanks for responding to my blog entry. The problem in implementing policy changes based on these behavioral economic studies is that it is hard to replicate most of these stylized lab experiments (like the ultimatum game) in real life. I do hope we can get insights from behavioral studies that changes our attitude regrading conservation. Also, as an aside, I’m reading this wonderful book called Thinking Fast and Slow by Daniel Kahneman. If you are a fan of the behavioral economics religion, he is definitely god.

  2. rvcrawford

    On the contrary, Adam Smith’s philosophy of the invisible hand has been questioned many times. There have been many experiments since its inception that have contradicted the idea; all of which have spectacularly failed. Every government that has employed Marxism as their economic base has met the same fate. You are muddying the water between “self-interest” and “greed” and hard work and the fruits of one’s labors. Money is absolutely necessary. The minute you force someone to work for you, you have created a slave. Socialism creates a slave of the mind and in effect destroys the purpose of man: to expand the mind,

    People can be “hard wired for compassion and some goodness” and at the same time be capitalistic. Money will be made off of the environment and climate change. The question is, will the money be made by bureaucrats writing policies which in effect benefits themselves and their donors or will the money be made by capitalists who use their ingenuity to invent new technologies. Do not demonize a moral person for working for money, a life only attainable in a capitalistic economy. Also, beware the social/cultural war, it tends to destroy the arena for free and open debate.

    Consider the words of Francisco D’Anconia, a character in Ayn Rand’s Atlas Shrugged, “So you think that money is the root of all evil? Have you ever asked what is the root of money? Money is a tool of exchange, which can’t exist unless there are goods produced and men able to produce them. Money is the material shape of the principle that men who wish to deal with one another must deal by trade and give value for value. Money is not the tool of the moochers, who claim your product by tears or of the looters, who take it from you by force. Money is made possible only by the men who produce. Is this what you consider evil?”

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