Behavioral Economics and the Environment

Gardner Brown and Daniel A. Hagen guestedited a recent special issue of Environmental & Resource Economics (Vol. 46, No. 2), and suprisingly wrote the first article themselves. They begin like this:

Many economists have embraced a paradigm characterized by perfect information, rational expectations and an otherwise benign environment in which perfect competition reigns, with very minor asides for imperfect competition. Rumblings of opposition have been growing louder. Nobel prizes are being awarded to scholars who have taken us out of this historic straight jacket. Lo and behold there can be asymmetric information, increasing returns to scale, cooperative behavior and agents who consistently fail to optimize.
Behavioral economics is another theme gathering strength, and it may be particularly germane to environmental and resource economics. Consumer theory, measurement of benefits, intergenerational discounting, mechanism design, and the role of fairness are all subjects of importance for environmental and resource economics and they are all areas in which behavioral economicsmay provide important insights.

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