Monthly Archives: May 2007

Behavioral/experimental economics and environmental policy

Are you an environmental economists who has been wanting to explore the possible application of behavioral and experimental economics to the design of environmental policy?

If you are, then you will most likely find useful to have a look at the site of the conference Frontiers in Environmental Economics organized by by Resources for the Future 26-27 February 2007. From the site you can download all the conference papers as well as listen to and watch the presentations.

Among the nine, very interesting papers, you can find:

Fiore, Harrison, Hughes, and
Rutströmby Virtual experiments and environmental policy.

Greenstone and Gayer (2006) Quasi-experimental and experimental approaches to environmental economics, with an application to estimating the costs of endangered species protection in North Carolina.

Do people have a taste for equality? Teaching cost-benefit analysis with a sprinkle of experimental economics

Apparently they do. In a recent article published in Nature (see the first paragraph)
Dawes et al (2007) found that in experimental settings:

Subjects reduce and augment others’ incomes, at a personal cost, even when there is no cooperative behaviour to be reinforced. Furthermore, the size and frequency of income alterations are strongly influenced by inequality. Emotions towards top earners become increasingly negative as inequality increases, and those who express these emotions spend more to reduce above-average earners’ incomes and to increase below-average earners’ incomes. The results suggest that egalitarian motives affect income-altering behaviours, and may therefore be an important factor underlying the evolution of strong reciprocity and, hence, cooperation in humans.

If you don’t have access to the article, you can read the excellent report by Inga Kiderra Economics Experiment Finds Taste for Equality. Here is the first paragraph:

According to a new study of behavioral economics, published in the April 12, 2007 issue of Nature, people will spend their own money to make the rich less rich and the poor less poor. They do so without any hope of personal gain, acting, it seems, out of a taste for equality and sense of fair play.

When teaching Cost-benefit analysis this spring, I presented to my students the main arguments for treating low- and high-income groups differently in CBA following the excellent presentation by Boardman et al. 2006 in Cost-Benefit Analysis – Concepts and Practice, 492 – 495. In addition to the “one person, one vote” principle and the standard argument of diminishing marginal utility of income, Boardman et al. (2006, 492) present the general argument that “income distribution should be more equal”. They write:

The second argument for giving dollars received or paid by the poor greater weight is CBA [cost-benefit analysis] than dollars received and paid by the rich is premised on the assertion that the current income distribution is less equal than it should be and social welfare would be higher if it were more equal“.

Dawes et al (2007) recent paper on Nature offers one possible base for argument that “income distribution should be more equal” and can be used as a reading to show students the importance of experimental economics for cost-benefit analysis.

References

Dawes, Christopher T. Fowler, James H. , Johnson, Tim, McElreath, Richard & Smirnov, Oleg (2007) Egalitarian motives in humans, Nature Volume 446 Number 7137, 794-796

Seminar on Happiness, Satisfaction, and Subjective Measures of Well-Being

Erik Angner, Assistant Professor of Philosophy and Economics at the University of
Alabama at Birmingham, will be giving a seminar on
Happiness, Satisfaction, and Subjective Measures of Well-Being
Monday 28.5.2007, 14-16 at the Department of Social and Moral Philosophy of the University of Helsinki,
Siltavuorenpenger 20 A, lecture room 334d (3rd floor).
Here is the abstract on his paper:

Abstract:

“Subjective measures of well-being, which are based on
answers to questions such as “Taking things all together, how would
you say things are these days – would you say you’re very happy,
pretty happy, or not too happy these days?,” are often presented as
more direct, and therefore superior to, more traditional economic
measures of welfare. This paper explores what account of well-being
is implicit in the literature on subjective measures, and in light of
the analysis, examines some of the claims made for them. I will argue
that the accounts of well-being are best classified as mental state
accounts (though there are potential exceptions); that proponents of
subjective measures appear to disagree among themselves about what
mental state (or states) is (or are) constitutive of well-being;
that, either way, these mental state accounts are implausible as
accounts of well-being; and that as a result, subjective measures
cannot be defended as more direct than other measures. Though I end
up rejecting some of the claims made by proponents of subjective
measures, however, I do not dismiss the use of such measures altogether.”

The full paper is available at: http://www.helsinki.fi/~pylikosk/angner.pdf

Erik Angner is currently co-authoring (with George
Loewenstein) a book titled Foundations of Behavioral Economics.