Behavioural Economics

Standard environmental policies consist of, among others, offering subsidies or imposing taxes to increase the financial attractiveness of environmentally-friendly behavior, or simply imposing rules and regulations to directly protect the environment. These policies are based on the assumption that firms, citizens and consumers only care about their own welfare and are unwilling to incur cost to help protect the planet. Casual observation of people’s behavior (including our own) suggests that humans are willing to voluntarily engage in pro-environmental behaviors, and that gains in one’s own material welfare is not the only driver of human behavior.
In this course we combine insights from psychology and behavioral economics to analyze whether and to what extent humans are able to overcome the tragedy of the commons, what factors are the driving force behind this, and how these mechanisms can be harnessed to make environmental policies more effective. We focus not just on the effectiveness of various types of behavioral interventions (like harnessing social norms or default effects), but also on how behavioral biases can be used to strengthen existing policies.
The set-up of the three-week course is as follows. In each week we cover one topic. In the first week we will discuss the evidence of whether people can overcome the tragedy of the commons, and then especially on the circumstances that foster (pro-environmental) cooperation. The second week presents insights into the behavioral mechanisms that help people take pro-environmental actions, and the third is on the effectiveness of behavioral interventions in stimulating pro-environmental behavior. In every week there are two interactive lectures, and a tutorial. The first lecture of the gives a broad introduction to the topic, and the second is a mixture of the teachers and the students presenting seminal papers on the topic of the week. The tutorial is aimed at gaining hands-on experience with analyzing data on a series of behavioral interventions, and presenting the results.

After successful completion of this course students are expected to be able to:

• assess the general (underlying) causes of unsustainable behavior;
• appraise how decision biases can be harnessed to induce agents to contribute to a sustainable management of the planet;
• compare behavioral and neoclassic approaches to environmental and sustainability policies;
• analyze empirical evidence and data relative to (un)sustainable behavior;
• evaluate (empirical) studies on sustainability behaviors and (orally) present these insights to policy-oriented and/or scientific audiences;

Assumed Knowledge:
As this is an advanced course on economics, students are expected to have followed a course on econometrics (e.g. AEP21306 or YSS34306, or similar level); they should also have basic understanding of environmental economics.