19th Century Urban Transport Was An Environmental Problem

An Environmental Law

Jan 20, 2012 • Behavioral Economics, Demand, Supply, and Markets, Developing Economies, Environment, Macroeconomic Measurement, Regulation, Thinking Economically • 197 Views    No Comments

Asked if they want lower gasoline taxes that make more driving affordable, people typically say, “Yes.” Told that the only electricity for a village in India is from coal-fired plants, most people will say it’s okay.

    When making decisions about driving and electricity, we tend to observe the iron law of climate policy. Choosing between economic growth and reducing emissions, we take growth. Or, as a Chinese climate negotiator said during a Peking University speech, “I cannot accept someone from a developed nation having more right than me to consume energy…We do not want to pollute as they [the Americans] did, but we have the right to pursue a better life.” Correspondingly, The Economist asked people in the U.S. how much they would be willing to spend, per household, per year, on a climate bill. While $80 got majority support, $170 did not, and, at $770, opposition was overwhelming.

    As The Climate Fix author, University of Colorado professor Roger A. Pielke said, “The iron law of climate policy says that even if people are willing to bear some costs to reduce emissions, they are willing to go only so far.”

    How then to break the “iron law?” We will look at proposals tomorrow.

    The Economic Lesson

    Entering the realm of behavioral economics, science writer Jonah Lehrer suggests that we are less willing to select alternatives that provide short term loss and long term gratification. His example, in How We Decide, was people’s credit card excesses and how “…our emotions…tend to overvalue immediate gains (like a new pair of shoes) at the cost of future expenses (high interest rates).

    An Economic Question: How does Jonah Lehrer’s credit card example relate to climate change policy?

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