Geoscience Reference
In-Depth Information
It is a peculiar truth that the assumption that
humans act in the rational ways described above
does not come from the study of actual human
behaviour, but from theoretical assessments of
what types of behaviour are needed in order for
free market economies to operate efficiently
(Thaler and Sunstein, 2008). In a market economy,
the efficient distribution of goods and services
requires humans to respond to price signals in a
rational way: buying the things that they want at
the most competitive prices. Such actions are
important because they indicate to entrepreneurs
the products and services that people want more
of, and stimulate healthy competition in the
pricing of goods. On these terms, the assumption
that people tend to perpetually act out of self-
interest (pursuing the best prices for the goods
and services that you produce and consume) is
also crucial. As soon as people stop acting out of
relatively narrow forms of self-interest, it becomes
more likely that collusions will occur (often involv-
ing price fixing and profit manipulation), and
the market place stops functioning as it should.
The figure that has emerged to represent rational
human action in the market within the popular
conscious is
homoeconomicus
(Persky, 1995). The
figure of homoeconomicus is a kind of ideal type
of 'economic person' who lives out life as a rational
market actor.
In the section that follows we explore some of
the problems associated with the idea of homo-
economicus. But for now it is important to
understand why it has become such an important
framework within which to understand human
behaviour, and the impacts that it has had on
the design of environmental policy. In the first
instance, the figure of homoeconomicus has had
enduring influence because a belief in rational
human action suggests that you can have personal
freedom (at least the economic freedom to act as
you will in the market place) and social stability (in
a self-regulating market system) (see Hayek, 1960;
Friedman, 1982). On these terms, the market place
becomes associated with the meeting of two valued
human desires: 1) the desire to avoid anarchy and
the break down of socio-economic systems; and
2) the preservation of personal liberty, as there is
no need for an authoritarian state to administer
socio-economic stability (see
Chapter 7)
. Once
the principle of rational human action is accepted
it has clear policy implications. If, for example,
you wish to ensure that people's actions are less
damaging to the environment, there are different
ways you can shape their decision-making without
having to revert to the coercive powers of law and
legislation (se
e Table 8.1).
One popular strategy is
to create markets within the environmental areas
you wish to promote behaviour change within. In
relation to climate change for example, Australia
and the European Union have now established
carbon markets in and through which companies
can trade greenhouse gas emission permits with
each other. Carbon markets work on the basis that
climate change has emerged because the financial
costs of greenhouse gas emissions have not
previously been priced. By giving greenhouse gas
emissions a price you provide a rational incentive
for companies to reduce their emissions and
enhance their profits (see Richardson et al, 2012:
Chapter 12). Alternatively, policies could seek
to ensure that individuals are receiving adequate
information on the costs and consequences of
their environmental actions. In this context, edu-
cational programmes and advertising campaigns
can be used to ensure that information on the
nature of environmental change is circulated as
widely as possible. Finally, rationally oriented
environmental policies also involve the use of
direct financial inducements and penalties to foster
more sustainable patterns of environmental
behaviour. If governments want to encourage
people to use less non-renewable energy resources
(such as oil and gas), they can raise taxes on
them (thus increasing their price), or you could
offer financial subsidies that encourage people
to fit renewable energy technologies in their
homes (in countries such as Germany, the gov-
ernment offers substantial financial inducements
to people wishing to fit solar panels to their
homes).
