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Behavioural economics, hyperbolic discounting and environmental policy

Hepburn, Cameron, Duncan, Stephen and Papachristodoulou, Antonis (2010) Behavioural economics, hyperbolic discounting and environmental policy. Environmental and Resource Economics, 46 (2). pp. 189-206. ISSN 0924-6460

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Abstract

This paper reviews some recent research in “behavioural economics” with an application to environmental issues. Empirical results from behavioural economics provide a reminder that human behaviour is context-dependent, implying that policy may go awry if based upon models of behaviour which are inappropriate to the contexts in which decisions are made. Recognizing that agents may, in some contexts, systematically make mistakes raises challenging questions about the role of “paternalism” in government policy. The paper considers the research into hyperbolic discounting, and examines the implications for environmental policy. We develop a model of resource management under hyperbolic discounting, which shows that if a planner is unable to commit to a policy, the temptation to re-evaluate the policy in future could lead to an inadvertent collapse in the stocks of a natural resource.

Item Type: Article
Official URL: http://www.springer.com/economics/environmental/jo...
Additional Information: © 2010 Springer Science + Business Media B.V.
Library of Congress subject classification: G Geography. Anthropology. Recreation > GE Environmental Sciences
H Social Sciences > HB Economic Theory
Sets: Research centres and groups > Grantham Research Institute on Climate Change and the Environment
Collections > Economists Online
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Date Deposited: 01 Mar 2011 09:54
URL: http://eprints.lse.ac.uk/32912/

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