Monthly Archives: June 2005

Coverage of Energy Issues in Principles of Economics Textbooks

How are energy issues covered in Principle of Economics textbooks? Is this coverage adequate? These are some of the questions Jack Reardon deals with in the article Coverage of Energy Issues in Principles of Economics Textbooks (April 8, 2005).

Time for negative eco-labels?

Environmentally responsible purchasing behavior has been greatly facilitated by the development of eco-labelling schemes, which provide information about the products’ otherwise unassessable environmental quality.
Most eco-labels identify the least polluting alternative within a product group (positive labelling), while virtually no labels exists to help identify the most environmentally adverse products (negative labelling). [One exception is the EU electricity multilevel labelling scheme that ranks on a scale from A to G electric appliances in terms of their energy efficiency]

Is this focus on positive eco-labels desirable or should we rather ask policy makers to develop negative and multilevel labelling schemes?

Grankvist, Dahlstrand and Biel (2004) suggest that negative labelling may be more effective in reducing the adverse environmental impact of consumption than positive labelling. In a computer based experiment they found that while positive and negative labelling had an equal impact on individuals with a strong interest for the environment and had no impact on those not caring about the environment, they had a very different impact on the choices of individuals with an intermediate interest for the environment. These individuals were more affected in their products’ choice by the negative label than by the positive label, that is, they more often changed their purchase decisions in a more environmentally friendly direction when faced with the negative labels then when faced with the positive one. On the basis of this result Grankvist, Dahlstrand and Biel (2004) conclude that if we want to encourage less polluting consumption then we should develop negative eco-labels and multi-level labels.

The developments of multi-levelled and negative eco-labels should also be encouraged on the ground of their potential impact on social norms. Negative labelling reinforces a social norm that frowns upon the purchase of the most polluting product, while positive labelling one that rewards the purchase of the least polluting one. These norms in turn, are likely to lead to significantly different effects in terms of environmental impacts: Norms that socially reward the purchase of the least polluting products may lead to increases in aggregate polluting emissions when consumers consider only the environmental impact per product unit. However, norms of social disapproval for brown consumption will not have this effect .(Lombardini-Riipinen 2002.)

Positive eco-labels are environmentally effective when consumers care about the environmental impact of their overall consumption. If they only care about the environmental impact per product unit, argue Bougherara, Grolleau and Thiebaut (2005) , then eco-labels may as well lead to a deterioration of the environment. This will happen when eco-labels stop consumers feeling guilty about their purchases and thus induce an increase in the consumption of the labelled good. This is most likely when the cost of the environmental improvement to the producer is relatively low, so that the difference between the price of the eco-labelled and conventional good is relatively small.

Positive eco-labels may also increase total demand and thereby emissions when they project a positive image on the non-labelled products of the producer or brand offering the eco-labelled product (Dosi and Moretto 2001).

In some circumstances eco-labels may not have any environmental impact. This is the case when the supply for the eco-labelled product exceeds its demand at the time when labelling is introduced (Mattoo and Singh 1994). This has so far been the case of green electricity in Finland, where in 2004 the total sales of green electricity covered 18.47% of the total supply of certified green electricity [authors calculations on the basis of the statistics presented by the Finnish Association for Nature Conservation].

social norm: the shared expectation within a society, organization or group as to what behavior is desirable (Coleman 1990, 242). The term social refer to the fact that the norm is sustained by other people’s approval and disapproval.


Bougherara, D. , Grolleau, G. and Thiebaut, L. 2005. Can Labelling Policies Do More Harm Than Good? An Analysis Applied to Environmental Labelling Schemes<a href=””.(2005) European Journal of Law and Economics 19(1), 5 -16.

Coleman, J., 1990. Foundations of Social Theory, Cambridge: Harvard University Press

Dosi, C. and Moretto, M. 2001. Is Ecolabelling a Reliable Environmental Policy Measure? Environmental and Resource Economics 18(1), 113-27.

Grankvist, G., Dahlstrand, U., & Biel, A. (2004). The impact of environmental labeling on consumer preference: Negative versus positive labels. Journal of Consumer Policy, 27, 213-230

Lombardini-Riipinen, Chiara. 2002 Buying Green: The Social Reward Trap

Mattoo, A. and Singh, H. V. 1994. Eco-labelling: Policy considerations. Kyklos 47(1)
, 53-65.

New on the net: The Environmental Economics blog

On June 21 the Environmental Economics blog was launched. In the introduction to the blog it reads that “The Environmental Economics blog is dedicated to the dissemination of economists’ views on current environmental and natural resource issues. We hope this blog will help bring economists’ views on environmental issues further into the mainstream. The intended audience includes the general public and students. Posts are non-technical.” The blog looks very promising and there are already some very interesting posts. I recommed it.


The last years have witnessed exiciting advances in neurosciences. What is the relevance of these developments for economic theory? Find the answer in the excellent article by Camerer, C., Loewenstein, G. and Prelec, D. 2005 Neuroeconomics: How Neuroscience can Inform Economics in the Journal of Economic Literature 43(1), (the link is to a previous version of the paper accessible to everyone)

Institutional economics and the environment

What is institutional economics? What contributions can it give to environmental economics? If you have already heard about Coase or are familiar with terms such as transaction costs and property rights, then you have already had a first encounter with institutional economis. If you want to know more, you can read Parto, Saaed, 2005. Economic Activity and Institutions: Taking Stock, Journal of Economic Issues 39(1), 21-52 (Link via ProQuest, works only from computers of the University of Helsinki). In addition of a review of the development of institutional economics and a classification of institutions’ types, the article outlines a conceptual framework “for studying technological transitions as evident in two empirical cases: (1) the pulp and paper industry in Europe and (2) the Dutch waste arena (subsystem).” (Saaed 2005, 21)

Toward an economy of well-being

Two luminares in the fields of the measurement of subjective well-being and positive psychology, Ed Diener and Martin E. P. Seligman have published an interesting paper Beyond money: Toward an economy of well-being .2004 Psychological Science in the Public Interest, 5, 1-31, in which they suggest the creation of a national well-being index to be measured periodically and used to assist policy making. Such an index would provide a stronger set of findings as current findings are often based on “diverse and incommensurable measures of different concepts, in an haphazard mix of respondents”. The article reviews the literature on the impact on well-being of economic variables.

Other interesting links

The International Society for Quality-of-Life Studies

Ruut Veenhoven, The Netherlands
A large directory of happiness research and related materials

Positive Psychology (Martin E.P. Seligman)
The Martin Seligman Research Alliance on Positive Psychology

Happiness and Economics

What is happiness? What has happiness to do with economics?
When I chose to study economics, I had in mind that it would give me the tools to help make the world a better, happier place to live in. Although nowadays I find changing myself so that I can make people happier an hard enough task, I still believe that the aim of economics is to help develop policies that will increase the amount of happiness in society. After all Betham and the other founding fathers of economics believed that public policy should be aimed to maximize the sum of happiness in society. Later the aim of economics was restricted to the study of “human behavior as a relationship between given ends and scarce means which have alternative uses.”( Lionel Robbins 1932 An Essay on the Nature and Significance of Economic Science). Recently however there has been a renewed interest on the relationship between economics and happiness. Here is the link to the Lionel Robbins memorial lectures given by Richard Layard on March 2003:

  • lecture1 Happiness: has social science a clue?
  • lecture2 Income and happiness: rethinking economic policy
  • lecture3 What would make a happier society

Other good sources on economics and happiness are the review article by Frey. & Sturzer 2002 ‘What Can Economists Learn from Happiness Research? Journal of Economic Literature
40(2), 402-35 and the book Happiness and economics: How the economy and institutions affect well-being; By Frey, Bruno S.; Stutzer, Alois, 2002, pp. viii, 220, Princeton and Oxford: Princeton University Press and the book Happiness in economics; By Easterlin, Richard A., ed., 2002, pp. xvi, 244, Elgar Reference Collection. International Library of Critical Writings in Economics, vol. 142. Cheltenham, U.K. and Northampton, Mass.: Elgar; distributed by American International Distribution Corporation, Williston, Vt.